##### 









SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31,
    2002                                             
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition
    period           to           .                                      

Commission File Number: 1-10398

Giant Industries, Inc.


(Exact name of registrant as specified in its
charter)


|                                                                                                 |  |                                         
|------------------------------------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                                                         |  | 86-0642718                              
|(State or other jurisdiction of
    incorporation or organization)                               |  | (I.R.S. Employer
    Identification No.)
|                                                                                                
|23733 North Scottsdale Road,
    Scottsdale, Arizona(Address of principal executive
    offices) |  | 85255(Zip Code)                         

Registrants telephone number, including
area code:

(480) 585-8888


Securities registered pursuant to
Section 12(b) of the Act:

|                             |  |                                          
|---------------------------- |  | -----------------------------------------
|Title of each class          |  | Name of each exchange on which registered
|                             |  |                                          
|Common Stock, $.01 par value |  | New York Stock Exchange                  

Securities registered pursuant to
Section 12(g) of the Act:

None


Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and
(2) has been subject to such filing requirements for the
past
90 days.     Yes þ          No o

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendments
to this
Form 10-K.     o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Exchange Act
Rule 12b-2).     Yes o          No þ

As of February 28, 2003, 8,571,779 shares of
the registrants Common Stock, $.01 par value, were
outstanding and the aggregate market value of the voting stock
held by non-affiliates of the registrant was approximately
$28,134,000 based on the New York Stock Exchange closing price
on February 28, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

Parts of the Proxy Statement for the
Registrants 2003 Annual Meeting of Stockholders are
incorporated by reference in Part III of this Form 10-K
Report.



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##### 



PART I



|                |                        
|--------------- | -----------------------
|Items 1. and 2. | Business and Properties

General

Giant Industries, Inc., a Delaware corporation
(together with its subsidiaries, Giant or the
Company), through its wholly-owned subsidiary Giant
Industries Arizona, Inc. and its subsidiaries (Giant
Arizona), is engaged in the refining and marketing of
petroleum products. These operations are conducted on both the
East Coast (primarily in Virginia, Maryland, North and South
Carolina and the New York Harbor) and in the Southwest
(primarily in New Mexico, Arizona, and Colorado, with a
concentration in the Four Corners area where these states
adjoin). In addition, Phoenix Fuel Co., Inc. (Phoenix
Fuel), a wholly-owned subsidiary of Giant Arizona,
operates an industrial/ commercial wholesale petroleum products
distribution operation primarily in Arizona.

The Company currently has three strategic
business units, the Refining Group, the Retail Group and Phoenix
Fuel. Other Company operations, consisting primarily of the
Companys corporate staff operations, are not included in
any of the strategic business units. The Company believes that
the Refining Group, the Retail Group and Phoenix Fuel are its
only reportable business segments. See the discussion of Company
segments contained in Item 8, Note 2.

The Refining Group operates the Companys
Ciniza and Bloomfield refineries in the Four Corners area of New
Mexico and the Yorktown refinery in Virginia. In addition to
these three refineries, the Refining Group operates a crude oil
gathering pipeline system in New Mexico that services the Four
Corners refineries, two finished products distribution
terminals, and a fleet of crude oil and finished product truck
transports. The Companys three refineries manufacture
various grades of gasoline, diesel fuel, and other products from
crude oil, other feedstocks, and blending components. In
addition, finished products are acquired through exchange
agreements, from third party suppliers and from Phoenix Fuel.
These products are sold through Company-operated retail
facilities, independent wholesalers and retailers, industrial/
commercial accounts, and sales and exchanges with major oil
companies. Crude oil, other feedstocks and blending components
are purchased from third party suppliers.

The Retail Group operates the Companys
service stations, which include convenience stores or kiosks,
and one travel center. These operations sell various grades of
gasoline, diesel fuel, general merchandise, including tobacco
and alcoholic and nonalcoholic beverages, and food products to
the general public through retail locations. The Refining Group
or Phoenix Fuel supplies the petroleum fuels sold by the Retail
Group. General merchandise and food products are obtained from
third party suppliers. At December 31, 2002, the Company
operated 135 retail service stations with convenience
stores or kiosks.

The Companys Phoenix Fuel operation is an
industrial/ commercial wholesale petroleum products distribution
operation, which includes several lubricant and bulk petroleum
distribution plants, an unmanned fleet fueling
(cardlock) operation, a bulk lubricant terminal
facility, and a fleet of finished product and lubricant delivery
trucks. The petroleum fuels and lubricants sold are primarily
obtained from third party suppliers and to a lesser extent from
the Refining Group.

The Companys strategy is to profitably
operate its refining, retail marketing and Phoenix Fuel
operations. The immediate strategic focus is to:



| |   |                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | efficiently integrate the Yorktown refinery,
    which was purchased by the Company in 2002, into the
    Companys existing operations while maximizing the
    profitability of all the Companys refineries;
|
| |  | work with producers in the Four Corners area to
    augment crude oil supply;                                                                                                                                  
|
| |  | maximize the profitability of the Retail Group by
    increasing sales of high-margin merchandise and continuing to
    reduce costs;                                                                          
|
| |  | maximize the profitability of Phoenix Fuel by
    increasing wholesale fuel volumes, expanding its service
    offerings, and broadening its wholesale customer base;                                          

1



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##### 





| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | increase cash flow by continuing to reduce
    operating expenses and eliminating non-essential capital
    expenditures;                  
|
| |  | rationalize the Companys asset base by
    selling non-strategic and underperforming assets and selectively
    pursuing acquisitions: and
|
| |  | continue the Companys debt reduction
    strategy implemented in 2002.                                                                    

For a further discussion of the Yorktown refinery
acquisition, refer to the discussion in Note 4 included in
Item 8.

Refining Group



| |                                         
| | ----------------------------------------
| | The Ciniza and Bloomfield
    Refineries



| |         
| | --------
| | Refining

The Company owns and operates the only active
refineries in the Four Corners area. The Ciniza refinery, with a
crude oil throughput capacity of 20,800 barrels per day
(bpd) and a total capacity including natural gas
liquids of 26,000 bpd, is located on 880 acres near Gallup, New
Mexico and the Bloomfield refinery, with a crude oil throughput
capacity of 16,000 bpd and a total capacity including natural
gas liquids of 16,600 bpd, is located on 285 acres near
Farmington, New Mexico. Although the Ciniza and Bloomfield
refineries are 120 miles apart, they are operated in an
integrated fashion. Consolidating the environmental, safety,
marketing, supply, purchasing, engineering and accounting
functions historically has led to efficiency gains and cost
reductions. The Four Corners area serves as the primary market
for the refined products and as the primary source of supplies
of crude oil and natural gas liquids (NGLs) for
these two refineries.

Management believes that the technical
capabilities of these two refineries, together with the high
quality of locally available feedstocks, enable these refineries
to achieve refinery yields that are comparable to those achieved
by some larger, more complex refineries located outside of the
area. Both refineries are equipped with fluid catalytic
cracking, naphtha hydrotreating, reforming, and liquefied
petroleum gas recovery units, as well as diesel hydrotreating
and sulfur recovery units to manufacture low sulfur diesel fuel
that meets requirements currently in effect. The Ciniza refinery
utilizes an alkylation process to manufacture high-octane
gasoline from its catalytic cracking unit olefins. The
Bloomfield refinery accomplishes this using a catalytic
polymerization unit. The Ciniza refinery is also equipped with
an isomerization unit, which enables it to produce additional
gasoline through the processing of NGLs, and cogeneration
facilities. These processing configurations enable the
refineries to yield 90% or more of high-value products,
including gasoline and diesel fuel, from each barrel of crude
oil refined. The refineries manufacture a product slate that can
include 100% unleaded gasoline and 100% low sulfur diesel fuel.
The refineries also are capable of manufacturing jet fuel if the
need should arise.

2



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##### 



Set forth below is data with respect to the
Companys Four Corners refinery operations and the primary
refined products produced during the indicated periods.

|                                       |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |        |        |  
|-------------------------------------- | ------------------- | ----------------------- | ---- | ------ | ------ | ---- | ---- | ------ | ------ | ---- | ---- | ------ | ------ | - | ---- | ------ | ------ | - | ---- | ------ | ------ | -
|                                       |                     |                        
|                                       |                     | Year Ended December 31,
|                                       |                     |                        
|                                       |                     | 2002                    |      | 2001   |        | 2000 |      | 1999   |        | 1998
|                                       |                     |                         |      |        |        |      |      |        |        |     
|Feedstock throughput:(1)               |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       
|                                       | Crude oil           |                         |      | 26,600 |        |      |      | 27,000 |        |      |      | 29,600 |        |   |      | 31,900 |        |   |      | 32,500 |       
|                                       | NGLs and oxygenates |                         |      | 5,900  |        |      |      | 6,200  |        |      |      | 5,800  |        |   |      | 6,500  |        |   |      | 5,700  |       
|                                       |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       
|                                       |                     | Total                   |      |        | 32,500 |      |      |        | 33,200 |      |      |        | 35,400 |   |      |        | 38,400 |   |      |        | 38,200 |  
|                                       |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       
|Crude oil throughput (as a % of total) |                     |                         | 82   | %      |        |      | 82   | %      |        |      | 84   | %      |        |   | 83   | %      |        |   | 85   | %     
|Rated crude oil capacity utilized      |                     |                         | 72   | %      |        |      | 73   | %      |        |      | 80   | %      |        |   | 87   | %      |        |   | 88   | %     
|Refinery margin ($/bbl)                |                     | $                       | 6.84 |        |        | $    | 9.69 |        |        | $    | 7.63 |        |        | $ | 6.89 |        |        | $ | 4.83 |       
|Products:(1)                           |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       
|                                       | Gasoline            |                         |      | 21,400 |        |      |      | 21,400 |        |      |      | 22,500 |        |   |      | 23,800 |        |   |      | 23,800 |       
|                                       | Diesel fuel         |                         |      | 8,100  |        |      |      | 8,600  |        |      |      | 9,600  |        |   |      | 10,700 |        |   |      | 11,400 |       
|                                       | Other               |                         |      | 3,000  |        |      |      | 3,200  |        |      |      | 3,300  |        |   |      | 3,900  |        |   |      | 3,000  |       
|                                       |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       
|                                       |                     | Total                   |      |        | 32,500 |      |      |        | 33,200 |      |      |        | 35,400 |   |      |        | 38,400 |   |      |        | 38,200 |  
|                                       |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       
|High Value Products (as a % of total): |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       
|                                       | Gasoline            |                         |      | 66     | %      |      |      | 65     | %      |      |      | 64     | %      |   |      | 62     | %      |   |      | 62     | %     
|                                       | Diesel fuel         |                         |      | 25     | %      |      |      | 26     | %      |      |      | 27     | %      |   |      | 28     | %      |   |      | 30     | %     
|                                       |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       
|                                       |                     | Total                   |      |        | 91     | %    |      |        | 91     | %    |      |        | 91     | % |      |        | 90     | % |      |        | 92     | %
|                                       |                     |                         |      |        |        |      |      |        |        |      |      |        |        |   |      |        |        |   |      |       



---



|    |                                              
|--- | ---------------------------------------------
|(1) | Average barrels (bbls) per day
    (bpd).

Each refinery operating unit requires regular
maintenance, as well as repair and upgrade shutdowns (referred
to as turnarounds) during which it is not in
operation. Turnaround cycles vary for different units. In
general, refinery turnarounds are managed so that some units
continue to operate while others are down for scheduled
maintenance. Maintenance turnarounds are implemented using
refinery personnel as well as additional contract labor.
Turnaround work proceeds on a continuous 24-hour basis to
minimize unit down time.

In general, a major refinery turnaround is
scheduled every four years. The Ciniza refinery had a partial
turnaround in the second quarter of 2002 and is scheduled for a
major turnaround in 2004. The Bloomfield refinery had a major
turnaround in the fourth quarter of 2001. In addition, the
reforming units at each refinery must be shut down one or two
times a year to regenerate catalyst. This is typically a nine to
10 day shutdown and is necessary to rejuvenate the catalyst
and enable continued production of reformate, a high-octane
blending component. During such shutdowns, turnaround
maintenance and inspection is performed.

Unscheduled maintenance shutdowns also occur at
the refineries, but the Company believes that the record of both
refineries with respect to unscheduled maintenance shutdowns is
generally good compared with the industry as a whole.



| |                    
| | -------------------
| | Raw Material Supply

The Ciniza and Bloomfield refineries primarily
process a mixture of high gravity, low sulfur crude oil,
condensate and NGLs. The locally produced, high quality crude
oil known as Four Corners Sweet is the primary feedstock for the
refineries.

The Company acquires crude oil from a number of
sources, including major oil companies and large and small
independent producers, under arrangements that contain
market-responsive pricing provisions. Many of these arrangements
are subject to cancellation by either party or have terms that
are not in excess of one year.

3



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##### 



In addition, these arrangements are subject to
periodic renegotiation, which could result in higher or lower
relative prices being paid for crude oil or lost crude oil
volumes. During 2002, the Company obtained approximately 24% of
the Four Corners refineries crude oil supply pursuant to a
contract with Exxon Mobil and approximately 15% pursuant to a
contract with Chevron/ Texaco, Inc., each of which is negotiated
annually.


The Ciniza and Bloomfield refineries continue to
be affected by reduced crude oil production in the Four Corners
area. The Four Corners basin is a mature production area and
accordingly is subject to natural decline in production over
time. This natural decline is being offset to some extent by new
drilling, field workovers, and secondary recovery projects,
which have resulted in additional production from existing
reserves.

As a result of the declining production of crude
oil in the Four Corners area since 1997, the Company has not
been able to cost-effectively obtain sufficient amounts of crude
oil to operate the Companys Four Corners refineries at
full capacity. The Companys refinery crude oil utilization
rates for its Four Corners refineries declined from 88% in 1998
to 72% in 2002. The Companys current projections of Four
Corners crude oil production indicate that the Companys
crude oil demand will exceed the crude oil supply that is
available from local sources for the foreseeable future. The
Company expects to operate the Ciniza and Bloomfield refineries
at lower levels than would otherwise be scheduled as a result of
shortfalls in Four Corners crude oil production. The Company is
assessing other long-term options to address the continuing
decline in Four Corners crude oil production. The options being
considered include: (a) encouraging exploration and
production activities in the Four Corners area; and
(b) examining other potentially economic raw material
sources, such as crude oil produced outside the Four Corners
area. None of these options, however, may prove to be
economically viable. The Company cannot provide assurance that
the Four Corners crude oil supply for the Ciniza and Bloomfield
refineries will continue to be available at all or on acceptable
terms. Any significant, long-term interruption or decline in the
supply of crude oil or other feedstocks for the Companys
Four Corners refineries, either by reduced production or
significant long-term interruption of transportation systems,
would have an adverse effect on the Companys Four Corners
refinery operations and on the Companys overall
operations. In addition, the Companys future results of
operations are primarily dependent on producing or purchasing,
and selling, sufficient quantities of refined products at
margins sufficient to cover fixed and variable expenses. Because
large portions of the refineries costs are fixed, a
decline in refinery utilization due to a decrease in feedstock
availability or any other reason could significantly affect the
Companys profitability. The Company may increase its
production runs in the future if additional crude oil or other
refinery feedstocks become available depending on demand for
finished products and refining margins attainable.

The Company supplements the Four Corners crude
oil used at its refineries with other feedstocks. These
feedstocks currently include locally produced NGLs and other
feedstocks produced outside of the Four Corners area. The
Company continues to evaluate supplemental feedstock
alternatives for its Four Corners refineries on both a
short-term and long-term basis. Whether or not supplemental
feedstocks are used at the refineries depends on a number of
factors. These factors include, among other things, the
availability of supplemental feedstocks, the cost involved, the
quantities required, the quality of the feedstocks, the demand
for finished products, and the selling prices of finished
products.

The Ciniza refinery is capable of processing
approximately 6,000 barrels per day of NGLs, consisting of
natural gasoline, normal butane and isobutane. NGLs are used as
gasoline blending components and to supply the isomerization and
alkylation units. NGLs increase the percentage of gasoline and
the octane levels that the refinery can produce, which typically
increases the Companys refining margins. NGLs further
enhance refinery margins because the Company has historically
been able to purchase NGLs at a lower cost per barrel than crude
oil. For most of 2002, this historic relationship has not
remained in place. The Company anticipates that over time the
price differential between crude oil and NGLs will return to
more historical levels.

An adequate supply of NGLs is available for
delivery to the Ciniza refinery, primarily through a
Company-owned pipeline connecting the Ciniza refinery to a NGLs
fractionation plant operated by a third party. NGLs also can be
transported to the Ciniza refinery by rail or transport truck.
The Company currently acquires the majority of its NGL
feedstocks pursuant to a long-term agreement under which NGLs
are made

4



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##### 



available to the Company at the fractionation
plant. This agreement contains market sensitive pricing
arrangements under which prices are adjusted on a monthly basis.


The use of gasoline containing oxygenates has
been government-mandated in certain areas in which the Company
sells motor vehicle fuel. Oxygenates are oxygen-containing
compounds that can be used as a motor vehicle fuel supplement to
reduce carbon monoxide emissions. The Company anticipates that
it will be able to purchase sufficient quantities of oxygenates
from third parties at acceptable prices for the foreseeable
future.



| |               
| | --------------
| | Transportation

Crude oil supply for the Four Corners refineries
comes primarily from the Four Corners area and is either
connected by pipelines, including Company-owned pipelines, or
delivered by Company-owned truck transports to pipeline
injection points or refinery tankage. The pipeline system
reaches into the Paradox and San Juan Basins and connects with
local common carrier pipelines. The Company currently owns
approximately 239 miles of pipeline for gathering and
delivering crude oil to the refineries. During the second
quarter of 2002, the Company sold approximately 132 miles
of pipeline. The Company will, however, continue to ship crude
oil on the pipeline segments that were sold. The Ciniza refinery
receives NGLs primarily through a 13-mile Company owned pipeline
connected to a NGLs fractionation plant. Currently, 32
Company-owned truck transports are involved in collecting crude
oil from producing wells to supply the refineries.



| |                           
| | --------------------------
| | Marketing and Distribution

The Four Corners Market.The Four Corners area is the primary
market area for products refined by the Ciniza and Bloomfield
refineries. The Companys secondary markets include the
Albuquerque area, the largest market in New Mexico, and the
Northern Arizona area. These secondary markets are primarily
supplied from the Ciniza refinery or the Companys
Flagstaff products terminal. The majority of the Companys
Four Corners gasoline and diesel fuel production is distributed
in New Mexico and Arizona. The Companys truck transports
support refinery sales in its primary market as well as its
secondary markets.

Terminal Operations.The Company owns a 6,000 bpd capacity
finished products terminal near Flagstaff, Arizona (the
Flagstaff Terminal). This terminal includes 65,000
bbls of finished product tankage and a truck loading rack with
three loading spots. Product deliveries to the Flagstaff
Terminal are being supplied by truck transport from the Four
Corners refineries.

The Company owns a 10,000 bpd capacity finished
products terminal in Albuquerque, New Mexico. This terminal
includes approximately 170,000 bbls of finished product tankage
and a truck loading rack with two loading spots. Product
deliveries to this terminal are made from the Ciniza refinery or
by pipeline from El Paso, Texas.

Refined Product Sales.During 2002, the Company sold
approximately 7,795,000 barrels of gasoline and 2,993,000
barrels of diesel fuel from the Four Corners refineries. The
Companys service stations and travel center sold
approximately 32% of these gasoline sales and 25% of these
diesel sales, or a total of approximately 30% of combined
production. In 2001, approximately 7,721,000 barrels of gasoline
and 3,124,000 barrels of diesel fuel were sold, with
approximately 32% of the gasoline sales and 21% of the diesel
sales, or a total of approximately 29% of combined production,
being sold by the Companys service stations and travel
center. Gasoline and diesel deliveries made through product
exchanges with large oil companies accounted for approximately
16% and 15% of the volume sold by the refineries in 2002 and
2001, respectively. The remaining gasoline and diesel sales were
made to wholesalers, retailers and industrial/commercial
customers. Supplementing sales barrels sourced from both
refineries were purchases for resale of gasoline and diesel from
other sources. The Companys other refined products are
marketed to various third party customers.



| |                      
| | ---------------------
| | The Yorktown Refinery



| |         
| | --------
| | Refining

On May 14, 2002, the Company completed the
purchase of the Yorktown refinery from BP Corporation North
America Inc. and BP Products North America Inc. (collectively,
BP). The Yorktown refinery is a

5



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##### 



61,900 bpd coking refinery located on 570 acres
of land known as Goodwins Neck, which lies along the York
River in York County, Virginia. The Yorktown refinery is
situated adjacent to its own deep-water port on the York River,
close to the Norfolk military complex and Hampton Roads
shipyards. The Company believes this location at times provides
the refinery with the opportunity to realize transportation
advantages of as much as $1.25 per barrel compared with Gulf
Coast refineries shipping to the mid-Atlantic market. The
Yorktown refinery began operations in 1956 under the ownership
of Amoco Oil Company, and has been repeatedly expanded and
upgraded to be modern and efficient. The Yorktown
refinerys sales historically have been concentrated in
Eastern Virginia and Maryland, where more than 50% of its
gasoline production was sold. The Company believes the Yorktown
refinerys refining capacity can be expanded to 75,000 bpd
at a total cost of approximately $5,000,000, and will consider
doing so depending on market conditions. The Companys
strategy at the Yorktown refinery will focus on maximizing its
profitability, which may include processing lower-grade, low
cost crude oil and selling products into higher-margin markets.


The Yorktown refinery has a Solomon complexity
rating of 11.0. In 2002, the refinery yielded 86% of high-value
products from each barrel of refinery intake. The Yorktown
refinery can manufacture both conventional and reformulated
gasoline, as well as low- and high-sulfur diesel. It is capable
of processing heavy, high acid crude oils, as well as light and
heavy sweet crude oils. It has demonstrated its ability to
process several different types of crude oil that are sourced
primarily from Canada, the North Sea, West Africa, South America
and the Far East. The refinerys location on the York River
and its own deep-water port access allow it to receive supply
shipments from these regions and provide flexibility to
transport finished products by barge, without dependence on area
pipelines. Since the Company acquired the Yorktown refinery on
May 14, 2002, the Yorktown refinery sold approximately
7,092,000 barrels of gasoline, 4,437,000 barrels of diesel fuel
and No. 2 fuel oil, 613,000 barrels of No. 6 fuel oil,
576,000 barrels of liquid petroleum gases, 116,000 short tons of
petroleum coke and 127,000 barrels of other products. Set forth
below is data with respect to the Yorktown refinery operations
and the primary refined products produced during the indicated
periods.

|                                                               |                                   |                         |    |         |        |         |    |         |        |         |    |        |        |   |    |        |        |   |    |        |        |  
|-------------------------------------------------------------- | --------------------------------- | ----------------------- | -- | ------- | ------ | ------- | -- | ------- | ------ | ------- | -- | ------ | ------ | - | -- | ------ | ------ | - | -- | ------ | ------ | -
|                                                               |                                   |                        
|                                                               |                                   | Year Ended December 31,
|                                                               |                                   |                        
|                                                               |                                   | 2002(a)                 |    | 2001(b) |        | 2000(b) |    | 1999(b) |        | 1998(b)
|                                                               |                                   |                         |    |         |        |         |    |         |        |        
|Feedstock throughput (bpd):                                    |                                   |                         |    |         |        |         |    |         |        |         |    |        |        |   |    |        |        |   |    |       
|                                                               | Crude oil and residual feedstocks |                         |    | 53,266  |        |         |    | 55,478  |        |         |    | 59,996 |        |   |    | 56,256 |        |   |    | 55,468 |       
|                                                               | Intermediates                     |                         |    | 4,031   |        |         |    | 5,210   |        |         |    | 5,784  |        |   |    | 4,549  |        |   |    | 2,451  |       
|                                                               |                                   |                         |    |         |        |         |    |         |        |         |    |        |        |   |    |        |        |   |    |       
|                                                               |                                   | Total                   |    |         | 57,297 |         |    |         | 60,688 |         |    |        | 65,780 |   |    |        | 60,805 |   |    |        | 57,919 |  
|                                                               |                                   |                         |    |         |        |         |    |         |        |         |    |        |        |   |    |        |        |   |    |       
|Rated crude oil capacity utilized                              |                                   |                         | 86 | %       |        |         | 90 | %       |        |         | 97 | %      |        |   | 91 | %      |        |   | 90 | %     
|Products (bpd):                                                |                                   |                         |    |         |        |         |    |         |        |         |    |        |        |   |    |        |        |   |    |       
|                                                               | Gasoline                          |                         |    | 30,379  |        |         |    | 33,356  |        |         |    | 36,000 |        |   |    | 32,898 |        |   |    | 28,318 |       
|                                                               | Diesel fuel and No. 2 fuel oil    |                         |    | 19,131  |        |         |    | 19,941  |        |         |    | 22,589 |        |   |    | 19,433 |        |   |    | 19,865 |       
|                                                               | Other(c)                          |                         |    | 7,787   |        |         |    | 9,419   |        |         |    | 9,501  |        |   |    | 11,166 |        |   |    | 11,567 |       
|                                                               |                                   |                         |    |         |        |         |    |         |        |         |    |        |        |   |    |        |        |   |    |       
|                                                               |                                   | Total                   |    |         | 57,297 |         |    |         | 62,716 |         |    |        | 68,090 |   |    |        | 63,497 |   |    |        | 59,750 |  
|                                                               |                                   |                         |    |         |        |         |    |         |        |         |    |        |        |   |    |        |        |   |    |       
|High-value products (as a percentage of total
    feedstocks): |                                   |                         |    |         |        |         |    |         |        |         |    |        |        |   |    |        |        |   |    |       
|                                                               | Gasoline                          |                         |    | 53      | %      |         |    | 55      | %      |         |    | 55     | %      |   |    | 54     | %      |   |    | 49     | %     
|                                                               | Diesel fuel and No. 2 fuel oil    |                         |    | 33      | %      |         |    | 33      | %      |         |    | 34     | %      |   |    | 32     | %      |   |    | 34     | %     
|                                                               |                                   |                         |    |         |        |         |    |         |        |         |    |        |        |   |    |        |        |   |    |       
|                                                               |                                   | Total                   |    |         | 86     | %       |    |         | 88     | %       |    |        | 89     | % |    |        | 86     | % |    |        | 83     | %
|                                                               |                                   |                         |    |         |        |         |    |         |        |         |    |        |        |   |    |        |        |   |    |       



---



|    |                                                                                                 
|--- | ------------------------------------------------------------------------------------------------
|(a) | Since acquisition on May 14, 2002.                                                              
|   
|(b) | Historical data was supplied by BP.                                                             
|   
|(c) | Other products includes petroleum coke converted
    to a fuel oil equivalent number of barrels.

6



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##### 



The Yorktown refinery will undergo a crude unit
and coker unit turnaround commencing at the end of March 2003.
These units are expected to be down for approximately three
weeks. The refinery will be operating at a reduced production
rate during these activities. In anticipation of the turnaround,
the Company will maintain inventories sufficient to meet its
contractual requirements during the turnaround.



| |                    
| | -------------------
| | Raw Material Supply

Most of the Yorktown refinerys feedstocks
come from Canada, the North Sea, West Africa, South America, and
the Far East. The ability to process a wide range of crude oils
allows the Yorktown refinery to vary crude oils in order to
maximize margins. The Yorktown refinery also imports process
unit feedstocks to supplement the various process units, and
blendstocks to optimize the product blending operations.
Reformer naphtha is the most commonly imported feedstock,
although gas oil is imported from time to time.

In 2002, a strike by Venezuelan oil workers
reduced exports of crude oil to world markets. Although the
Company does not purchase crude from any Venezuelan source, the
reduction of some of this approximately 3,200,000 barrels
per day of production has tightened crude markets thus
increasing prices. Despite this, the Companys Yorktown
refinery continues to be well supplied with crude oil and raw
materials.

At this time, the total effect on crude markets
and the refining sector due to a war with Iraq is unknown. Any
significant, long-term interruption in the supply of crude oil
or other feedstocks for the Yorktown refinery would have an
adverse effect on refinery operations and on the Companys
overall operations.



| |               
| | --------------
| | Transportation

The Yorktown refinerys strategic location
on the York River and its own deep-water port access allow it to
receive supply shipments from various regions of the world. All
of the crude oil supplied to the Yorktown refinery is delivered
by crude oil tankers. As a result, it has greater flexibility to
receive and move product than some of its competitors who rely
on pipeline systems.



| |                           
| | --------------------------
| | Marketing and Distribution

The Company groups the Yorktown refinerys
end markets into tiers, which represent varying refining margin
potential. Tier 1 areas have the highest refining margin
potential and include the Yorktown region. Tier 2 markets
include Salisbury and Baltimore, Maryland and Norfolk, Virginia.
North and South Carolina are considered Tier 3 markets, and the
New York Harbor area is designated Tier 4. The Company will
focus on selling products within Tiers 1, 2 and 3,
unless favorable refining margin opportunities arise in markets
like the New York Harbor.

Since its acquisition on May 14, 2002, the
Yorktown refinerys sales have been concentrated in
Tiers 1 and 2. Approximately 90% of product volume
moves across the marine dock, with the remaining amount being
transported by truck or rail. Third-party truck transports are
primarily used to deliver products to the refinerys
Tier 1 customers. The CSX rail system, on which the
refinery is located, transports shipments of mixed butane and
anode coke from the refinery to its customers.



| |                    
| | -------------------
| | Terminal Operations

The refinerys dock system, which is capable
of handling 98,000-ton deadweight tankers and barges up to
100,000 barrels, handles all crude oil receipts and the
bulk of the refinery finished product deliveries. The refinery
includes approximately 1,900,000 barrels of crude tankage,
including approximately 500,000 barrels of storage capacity
through leased tanks from Virginia Power. The refinery also owns
approximately 600,000 barrels of gasoline tank storage,
800,000 barrels of gasoline blend stock storage, and
300,000 barrels of distillate tank storage. The Company
increased the capacity of the truck loading rack in 2002 by
adding a second full service loading lane, as well as a new
diesel loading spot on an idle rack. These changes have improved
customer service, as well as terminal capacity.

7



---



##### 





| |             
| | ------------
| | Retail Group

At December 31, 2002, the Company operated
or managed 135 service stations with full convenience
stores or kiosks. These service stations are located in New
Mexico, Arizona, and Colorado. This represents a decrease of
15 units since December 31, 2001. Eleven of the
15 units were sold, three were closed, and one was combined
with another unit. During 2002, the Company neither acquired nor
constructed any service station/convenience stores. The Company
also operates a travel center located on I-40 adjacent to the
Ciniza refinery near Gallup, New Mexico (the Travel
Center). The Companys retail units sold
approximately 193,862,000 gallons of gasoline and diesel
fuel in 2002 compared to approximately 212,116,000 gallons
in 2001, a 9% decrease. The decrease in the volume of gasoline
and diesel fuel sold is mainly attributable to two factors:
(i) a decrease in total store count; and (ii) the cost
of fuel in the Phoenix area, which precluded a competitive
retail pricing position for most of 2002. Merchandise sales
decreased approximately 2% in 2002, to $141,870,000 from
$144,531,000. The decrease in merchandise sales was due entirely
to a decrease in store count. For 2002, same store sales
increased 5% for merchandise and increased 2% for gasoline and
diesel fuel compared to 2001.

On December 31, 2002, the Company had 56
units (including the Travel Center) branded Conoco pursuant to a
strategic branding/licensing agreement with Conoco Oil Co. In
addition, 21 units were branded Giant, 51 Mustang, six
Thriftway, and one each branded Gasamat and Diamond Shamrock.

Many of the Companys service stations are
modern, high-volume self-service stations. The Companys
service stations are augmented with convenience stores at most
locations, which provide items such as general merchandise,
tobacco products, alcoholic and nonalcoholic beverages, fast
food, health and beauty aids, and automotive products. In
addition, most locations offer services such as ATMs and
free air and water. These stores offer a mix of the
Companys own branded food service/deli items and certain
of the stores offer nationally franchised products such as
Blimpie, Taco Bell and A&W. Service stations with kiosks
offer limited merchandise, consisting primarily of tobacco
products, but also including candy and other snacks and some
automotive products.

The Company also owns and operates the Travel
Center. The Travel Center provides a direct market for a portion
of the Ciniza refinerys diesel production and allows
diesel fuel to be sold at retail at virtually no incremental
transportation cost. During 2002, the Company sold approximately
23,072,000 gallons of diesel fuel at the Travel Center
(approximately 29% of the Ciniza refinerys total diesel
production). This compares to approximately
23,137,000 gallons of diesel fuel sold (approximately 27%
of the Ciniza refinerys total diesel production) during
2001. The Travel Center facility includes 18 high volume
diesel fuel islands, a large truck repair facility, and a
29,000 square foot shopping mall, which includes a
restaurant and various fast food operations.

8



---



##### 



Set forth below is data with respect to the
Companys retail operations for the indicated periods.

|             |                     |                                   |  |      |         |      |  |      |         |      |  |   |         |   |  |   |         |   |  |   |         |  
|------------ | ------------------- | --------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|             |                     |                                  
|             |                     | Year Ended December 31,          
|             |                     |                                  
|             |                     | 2002                              |  | 2001 |         | 2000 |  | 1999 |         | 1998
|             |                     |                                   |  |      |         |      |  |      |         |     
|Retail Group |                     |                                   |  |      |         |      |  |      |         |      |  |   |         |   |  |   |         |   |  |  
|             | Service Stations(1) |                                   |  |      |         |      |  |      |         |      |  |   |         |   |  |   |         |   |  |   |        
|             |                     | Fuel gallons sold (in thousands)  |  |      | 168,956 |      |  |      | 187,152 |      |  |   | 208,125 |   |  |   | 211,873 |   |  |   | 184,375 |  
|             |                     | Product margin ($/gallon)         |  | $    | 0.154   |      |  | $    | 0.170   |      |  | $ | 0.168   |   |  | $ | 0.179   |   |  | $ | 0.206   |  
|             |                     | Merchandise sold ($ in thousands) |  | $    | 135,767 |      |  | $    | 138,403 |      |  | $ | 131,825 |   |  | $ | 111,603 |   |  | $ | 95,496  |  
|             |                     | Merchandise margin                |  |      | 27      | %    |  |      | 28      | %    |  |   | 28      | % |  |   | 28      | % |  |   | 30      | %
|             |                     | Number of outlets at year end     |  |      | 135     |      |  |      | 150     |      |  |   | 179     |   |  |   | 172     |   |  |   | 166     |  
|             | Travel Center       |                                   |  |      |         |      |  |      |         |      |  |   |         |   |  |   |         |   |  |   |        
|             |                     | Fuel gallons sold (in thousands)  |  |      | 24,906  |      |  |      | 24,964  |      |  |   | 26,698  |   |  |   | 27,991  |   |  |   | 24,950  |  
|             |                     | Product margin ($/gallon)         |  | $    | 0.094   |      |  | $    | 0.103   |      |  | $ | 0.104   |   |  | $ | 0.111   |   |  | $ | 0.111   |  
|             |                     | Merchandise sold ($ in thousands) |  | $    | 6,103   |      |  | $    | 6,128   |      |  | $ | 6,719   |   |  | $ | 7,291   |   |  | $ | 7,331   |  
|             |                     | Merchandise margin                |  |      | 44      | %    |  |      | 44      | %    |  |   | 46      | % |  |   | 45      | % |  |   | 45      | %
|             |                     | Number of outlets at year end     |  |      | 1       |      |  |      | 1       |      |  |   | 1       |   |  |   | 1       |   |  |   | 1       |  



---



|    |                                                 
|--- | ------------------------------------------------
|(1) | Includes continuing and discontinued operations.

Phoenix Fuel

Phoenix Fuel is an industrial/commercial
wholesale petroleum products distributor marketing diesel fuel,
gasoline, jet fuel, kerosene, motor oil, hydraulic oil, gear
oil, cutting oil, grease and various chemicals and solvents.
Phoenix Fuel operates lubricant and bulk petroleum distribution
plants, cardlock fueling locations, a bulk lubricant terminal
facility, and a fleet of finished product transports, finished
product tankwagons and lubricant delivery trucks. Phoenix
Fuels operations are located throughout Arizona, and it
markets primarily in Arizona and also in Nevada, New Mexico and
Texas. Phoenix Fuel offers its customers a variety of services,
including fuel management systems, tank level monitoring, and
automated dispatch. Phoenix Fuel markets under the trade names
Phoenix Fuel, Firebird Fuel, Tucson Fuel and Mesa Fuel. Phoenix
Fuels principal customers are in the mining, construction,
utility, manufacturing, aviation and agriculture industries.

During 2002, Phoenix Fuel sold approximately
376,711,000 gallons of gasoline and diesel fuel. During
2001, approximately 394,158,000 gallons were sold. Sales of
additional products, including approximately
4,219,000 gallons of lubricants in 2002 and
4,537,000 gallons in 2001, and other related items, totaled
approximately $24,737,000 during 2002, compared to $25,726,000
during 2001. The petroleum products sold by Phoenix Fuel are
primarily purchased for resale from other refiners and marketers
and to a lesser extent from the Refining Group.

Set forth below is data with respect to the
Phoenix Fuel operations for the indicated periods.

|                                 |  |                         |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|-------------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                 |  |                        
|                                 |  | Year Ended December 31,
|                                 |  |                        
|                                 |  | 2002                    |         | 2001 |  | 2000 |         | 1999 |  | 1998
|                                 |  |                         |         |      |  |      |         |      |  |     
|Phoenix Fuel                     |  |                         |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Fuel gallons sold (in thousands) |  |                         | 376,711 |      |  |      | 394,158 |      |  |      | 424,290 |   |  |   | 351,949 |   |  |   | 314,763 |  
|Product margin ($/gallon)        |  | $                       | 0.054   |      |  | $    | 0.050   |      |  | $    | 0.052   |   |  | $ | 0.064   |   |  | $ | 0.067   |  
|Lubricant sales ($ in thousands) |  | $                       | 21,544  |      |  | $    | 22,347  |      |  | $    | 24,210  |   |  | $ | 22,067  |   |  | $ | 22,517  |  
|Lubricant margin                 |  |                         | 17      | %    |  |      | 17      | %    |  |      | 16      | % |  |   | 15      | % |  |   | 14      | %

9



---



##### 



Employees

The Company and its subsidiaries employed
approximately 2,465 persons on February 28, 2003,
including approximately 2,205 full-time and approximately
260 part-time employees. The Retail Group employed
approximately 1,555 persons, including approximately
230 part-time. The Refining Group employed approximately
620 persons including 15 part-time. Phoenix Fuel
employed approximately 200 persons, including
10 part-time. Corporate staff operations employed
approximately 90 persons, including 5 part-time.

The Paper, Allied  Industrial,
Chemical and Energy Workers International Union Local 2-10
represents the hourly workforce at the Yorktown refinery
pursuant to an agreement that expires in 2006. At
February 28, 2003 there were 119 employees represented by
the union. The Company acquired the Yorktown refinery in May
2002.

Other Matters



| |                       
| | ----------------------
| | Competitive Conditions

The industry in which the Company is engaged is
highly competitive. Many of the Companys competitors are
large, integrated oil companies which, because of their more
diverse operations, stronger capitalization and better brand
name recognition, are better able than the Company to withstand
volatile industry conditions, including shortages or excesses of
crude oil or refined products, or intense price competition.

The principal competitive factors affecting the
Companys refining operations are: (i) the quality,
quantity and delivered costs of crude oil, NGLs and other
refinery feedstocks; (ii) refinery processing efficiencies;
(iii) refined product mix; (iv) refined product
selling prices; (v) refinery processing costs per barrel;
(vi) the cost of delivering refined products to markets;
and (vii) the ability of competitors to deliver refined
products into our market areas by pipeline or other means.

The principal competitive factors affecting our
retail marketing business are: (i) location of service
stations; (ii) product price; (iii) product
availability and cost, including prices being offered for
refined products by major oil companies to the Companys
competitors in certain markets; (iv) appearance and
cleanliness of service stations; (v) brand acceptance; and
(vi) the development of gasoline retail operations by
non-traditional marketers, such as supermarkets and club
membership warehouses.

The principal competitive factors affecting
Phoenix Fuel are: (i) the availability of product supply
from other refiners and marketers; (ii) the ability to
generate margins sufficient to cover fixed and variable
expenses; and (iii) competition with major integrated oil
companies and independent fuel and lubricant marketing
organizations.



| |                                           
| | ------------------------------------------
| | Competitors in the Four Corners
    Market

The Company competes with major and larger
integrated oil companies and with independent refiners that have
refineries that are located outside the Four Corners area. These
refineries are larger and more efficient than the Companys
refineries. As a result, these refineries may have lower per
barrel processing costs. Refined products can be shipped to
Albuquerque, New Mexico and the Four Corners area through three
pipelines originating in El Paso, Texas, Amarillo, Texas, and
southeastern New Mexico. Furthermore, mergers between large
integrated oil companies, and upgrades to competitors
refineries have, and in the future may, result in increased
competition for the Companys Four Corners operations.

In addition, the Company is aware of a number of
actions, proposals or industry discussions regarding product
pipeline projects that could impact portions of its marketing
areas. One of these projects is the potential conversion and
extension of the existing Texas-New Mexico crude oil pipeline to
transport refined products from West Texas to New Mexico,
including Albuquerque and potentially Bloomfield. Another
potential project would take product on to Salt Lake City, Utah.
Previously these two projects were known as the Aspen Pipeline.
In addition, various actions have been undertaken to increase
the supply of refined products to El Paso, Texas, including the
Longhorn Pipeline project that runs from Houston, Texas to El
Paso.

10



---



##### 



El Paso is currently connected by the Chevron
pipeline to the Albuquerque area to the north and by the
Kinder-Morgan pipeline to the Phoenix and Tucson, Arizona
markets to the west. In addition, there are proposals that may
eventually increase the volume of product that can be
transported by pipeline from El Paso to the Phoenix and
Tucson markets. The completion of some or all of these projects
would result in increased competition by increasing the amount
of refined products potentially available in these markets, as
well as improving competitor access to these areas. It also
could result in new opportunities for the Company, as the
Company is a net purchaser of refined products in some of these
areas.




| |                                                  
| | -------------------------------------------------
| | Competitors in the Yorktown Refinerys
    Market

The Yorktown refinery is located in the petroleum
administration defense district, or PADD 1.
PADD 1 product demand is approximately 5,000,000 bpd.
There are 11 refineries located in PADD 1 supplying
approximately 1,700,000 bpd of refined products. The
balance, approximately 3,300,000 bpd, is imported from
other PADD refiners, primarily the Gulf Coast via the Colonial
Pipeline and offshore refiners by water transport. The Company
believes the Yorktown refinerys position between the Gulf
Coast and the New York Harbor at times provides a cost advantage
versus Gulf Coast refiners of as much as two to three cents per
gallon, or approximately $1.25 per barrel. The
refinerys ability to produce conventional and reformulated
gasolines, plus on road diesel fuel (low sulfur) and heating oil
(high sulfur) adds flexibility for the marketing of products.
The Yorktown refinery competes with major and larger integrated
refiners in PADD 1 and the Gulf Coast.



| |                                                
| | -----------------------------------------------
| | Regulatory, Environmental and Other
    Matters

Operations.The
Companys operations are subject to a variety of federal,
state and local environmental, health, and safety
(EHS) laws and regulations. These laws and
regulations apply to, among other things: (i) the discharge
of pollutants into the soil, air and water; (ii) product
specifications; (iii) the generation, treatment, storage,
transportation and disposal of solid and hazardous waste and
materials; and (iv) employee health and safety. The Company
believes that its refineries are processing currently utilized
feedstocks in substantial compliance with currently effective
EHS laws and regulations.

Various federal and state programs relating to
the composition of motor fuels are applicable to the
Companys operations. The Company believes that these are
the EHS programs that will have the most significant impact on
its operation, except for matters relating to alleged regulatory
violations and cleanup activities, addressed below. The federal
Environmental Protection Agency (EPA) has issued
rules that require refiners to reduce the sulfur content in
gasoline and diesel fuels. Refiners must begin producing
gasoline that satisfies low-sulfur, or Tier 2,
gasoline standards in 2004, with most refiners required to be in
full compliance for all production in 2006. Refiners must also
begin producing highway diesel fuel that satisfies ultra-low
sulfur diesel (ULSD) standards by June 2006 and be
in full compliance thereafter. There are limited exceptions to
the general compliance schedules, but all refiners and importers
of Tier 2 gasoline and ULSD are required to be in full
compliance with these new standards by 2010, without exception.

The Company applied to EPA for temporary relief
of the sulfur standards under 40 CFR Part 80 at the
Yorktown refinery. In March 2003, EPA approved the
Companys application and issued a compliance plan to the
Company. This compliance plan will allow the Company to postpone
in excess of $25,000,000 of capital expenditures for up to three
(3) years. The Company must be in full compliance with the
sulfur standards under 40 CFR Part 80 by
January 1, 2008. The Company must report to EPA annually on
its adherence to the compliance plan and on its progress in
meeting both the ULSD and the Tier 2 standards. Any failure
to comply with the conditions set by EPA could result in a
modification or revocation of the compliance plan. Further, EPA
reserved the right to modify or revoke the plan for other
reasons. EPA must, however, provide the Company with reasonable
notice of any anticipated changes in the plan and reasonable
lead time to implement any modifications to the plan.
Modifications to or revocation of the plan could result in a
reduction in the quantity of gasoline and diesel fuel available
for sale, and an increase in the quantity of high-sulfur
products, including product components, available for sale that
are not subject to the new standards, which would likely reduce
refining earnings.

11



---



##### 



The Company currently anticipates that the cost
of purchasing and installing the equipment necessary to produce
Tier 2 gasoline and ULSD at the Yorktown refinery will be
approximately $42,000,000. The Company anticipates that the
necessary ULSD and Tier 2 gasoline expenditures will occur
primarily in 2006 and 2007.

The Companys Ciniza and Bloomfield
refineries are not affected by EPAs compliance plan for
the Yorktown refinery. With respect to the Ciniza and Bloomfield
refineries, as a result of certain extensions permitted by the
Tier 2 gasoline standards, the Company believes that it
will qualify for an extension until 2007 of the date when the
annual average sulfur content of its gasoline must begin to be
reduced, with full compliance required in 2008. The Company
currently anticipates that it will spend approximately
$3,500,000 to make the necessary changes to the Four Corner
refineries, primarily in 2005 and 2006, to comply with the
Tier 2 gasoline rule, and approximately $15,000,000,
primarily in 2005 and 2006, to comply with the ULSD rule.

There are a number of factors that could affect
the Companys cost of compliance with the Tier 2 and
ULSD standards. These regulations affect the entire industry. As
a result, contract engineering and construction companies will
be busy and may charge a premium for their services.

The federal Clean Air Act requires the sale of
reformulated gasoline (RFG) in certain designated
areas of the country, including some market areas serviced by
the Yorktown refinery. The Yorktown refinery manufactures RFG
that satisfies the requirements of its markets. Motor fuels
produced by the Companys Four Corners refineries are not
sold in any areas requiring RFG. Arizona, however, has adopted a
cleaner burning gasoline (CBG) program. The
specifications are currently applicable to gasolines sold or
used in Arizona in Maricopa County, and portions of Yavapai
County and Pinal County. The Company does not presently
manufacture gasolines that satisfy Arizona CBG specifications.
The Company operates approximately 10 service station/
convenience stores in these areas, and also conducts wholesale
marketing operations there. The Company currently does not
intend to make the changes necessary to produce CBG at its Four
Corners refineries because the capital costs associated with
manufacturing large quantities of such gasolines would be
significant. The Company is able to purchase or exchange for
these gasolines to supply its operations in the CBG areas. It is
possible that additional legislation or regulations affecting
motor fuel specifications may be adopted that would impact
geographic areas in which the Company markets its products.

In 2000, Arizona passed legislation that requires
suppliers of gasoline in Arizona to submit a plan for phasing
out the addition of methyl tertiary butyl ether
(MTBE) to their gasoline. The Company timely
submitted the required plan. This legislation stated that
Arizona would phase out MTBE as soon as feasible, but not later
than 180 days after MTBE is phased out in California. MTBE
is scheduled to be phased out in California by December 31,
2003. The Company does not anticipate any significant impact on
its Four Corners operations if Arizona moves forward with its
plans to phase out MTBE. MTBE also is scheduled to be phased out
in New York by December 31, 2003. The Company does not
anticipate any significant impact on its Yorktown operations if
New York moves forward with its plans to phase out MTBE.

The Company cannot predict what new EHS
legislation or regulations will be enacted or become effective
in the future or how existing or future laws or regulations will
be administered or interpreted with respect to products or
activities to which they have not been previously applied. In
addition, EHS laws and regulations are becoming increasingly
stringent. Compliance with more stringent laws or regulations,
as well as more vigorous enforcement policies of regulatory
agencies, could have an adverse effect on the financial position
and the results of operations of the Company and could require
substantial expenditures by the Company for, among other things:
(i) the installation and operation of refinery equipment,
pollution control systems and equipment not currently possessed
by the Company; (ii) the acquisition or modification of
permits applicable to Company activities; and (iii) the
initiation or modification of cleanup activities.

Alleged Regulatory Violations.Notices of violations, compliance
orders, and similar governmental notices are issued by
governmental authorities and may allege violations of
environmental requirements. They may also assess monetary
sanctions for the alleged violations. The Company has received a
draft compliance order for its Ciniza refinery and a compliance
order for its Bloomfield refinery from the New Mexico
Environment Department alleging violations of air quality
regulations. Potential penalties for alleged violations

12



---



##### 



under both orders could be as high as $684,000.
The Company also has assumed environmental obligations under a
preexisting consent decree with EPA at its Yorktown refinery.
The consent decree includes provisions for stipulated penalties
if violations of these obligations are alleged by EPA. The
Company has received a notice of a stipulated penalty of
$163,100 for a flaring incident that occurred prior to the
Companys ownership of the refinery that is covered by the
consent decree. The Company is in discussions with EPA
concerning this penalty and believes it will be entitled to
indemnification from BP for the full amount of any penalty. For
a discussion of these matters as well as other outstanding
Orders, see Note 18 to the Companys Consolidated
Financial Statements in Item 8, captioned Commitments
and Contingencies.


The Company has received other allegations of
regulatory violations from governmental authorities from time to
time. The Company has responded or intends to respond in a
timely manner to all such matters. The Company does not believe
any such matters to be material. Despite the Companys
ongoing efforts to comply with environmental laws and
regulations, there can be no assurance that allegations of
regulatory violations will not be received from governmental
authorities in the future.

Discharges, Releases and Cleanup Activities.Refining, pipeline, trucking and
marketing operations are inherently subject to accidental
spills, discharges or other releases of petroleum or hazardous
substances that may give rise to liability to governmental
entities or private parties under federal, state or local
environmental laws, as well as under common law. Accidental
discharges of contaminants have occurred from time to time
during the normal course of the Companys operations,
including discharges associated with the Companys
refineries and its pipeline and trucking operations. The Company
has undertaken, intends to undertake, or has completed all
investigative or remedial work thus far required by governmental
agencies to address potential contamination by the Company. For
a discussion of significant cleanup activities in which the
Company is involved, see Note 18 to the Companys
Consolidated Financial Statements in Item 8, captioned
Commitments and Contingencies.

The Company is incurring, and anticipates that it
will continue to incur, remediation costs from time to time in
connection with current and former gasoline service stations
operated by the Company. The Companys experience has been
that such costs generally do not exceed $100,000 per incident,
and a portion of such costs may be subject to reimbursement from
state underground storage tank funds.

Although the Company has invested substantial
resources to prevent and minimize future accidental discharges
and to remediate contamination resulting from prior discharges,
there can be no assurance that accidental discharges will not
occur in the future, that future action will not be taken in
connection with past discharges, that governmental agencies will
not assess penalties against the Company in connection with any
past or future contamination, that the Company will receive
anticipated levels of indemnification, or that third parties
will not assert claims against the Company for damages allegedly
arising out of any past or future contamination.

Rights-Of-Way.Certain irregularities in title may
exist with respect to a limited number of the Companys
rights-of-way or franchises for its crude oil pipeline gathering
system. The Company, however, has continued its use of the
entirety of its pipeline gathering system. As of this date, no
claim stemming from any right-of-way or franchise matter has
been brought against the Company. The Company does not believe
that any such right-of-way matters or irregularities in title
will adversely affect its use or enjoyment of the pipeline
gathering system. Certain rights-of-way for the Companys
crude oil pipeline system must be renewed periodically. A
portion of the system, consisting of eight miles or
approximately 3% of the entire system, must be renewed in 2006.
The Company expects that approximately two years lead time will
be required to negotiate and complete renewal of these
rights-of-way. Additional rights-of-way for pipeline sections
consisting of 174 miles or approximately 73% of the system
must be renewed in 2009, and initial discussions for renewal may
begin in 2007.

Jet Fuel Claims.On
February 11, 2003, the Company filed a complaint against
the United States in the United States Court of Federal Claims
in connection with military jet fuel that the Company sold to
the Defense Energy Support Center (DESC) from 1983
through 1994. The Company asserted that the United States,
acting through DESC, underpaid for the jet fuel in the
approximate amount of $17,000,000. The DESC has indicated that
it may counterclaim if the Company pursues its claims and will
assert, based on its

13



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##### 



interpretation of the contract provisions, that
the Company may owe additional amounts ranging from
approximately $2,100,000 to $4,900,000. For a further discussion
of this matter, see Note 18 to the Companys
Consolidated Financial Statements in Item 8, captioned
Commitments and Contingencies.


Item 3.     Legal
Proceedings

The Company is a party to ordinary routine
litigation incidental to its business. There also is hereby
incorporated by reference the discussion of certain
contingencies contained in Items 1 and 2 under the
headings Regulatory, Environmental and Other
Matters, the discussions contained in Item 7, and the
information regarding certain related party transactions in
Note 7 and commitments and contingencies in Note 18 to
the Companys Consolidated Financial Statements in
Item 8.

Item 4.     Submission
of Matters to a Vote of Security Holders

Not applicable.

Executive Officers of the Registrant

Executive officers of the Company as of
March 1, 2003 are listed below:

|                  |  |     |    |          |  |                                                                                      |  |  |               | 
|----------------- |  | --- | -- | -------- |  | ------------------------------------------------------------------------------------ |  |  | ------------- | 
|Name              |  | Age |    | Position |  | Executive Officer Since                                                             
|                  |  |     |    |          |  |                                                                                     
|Fred L. Holliger  |  |     | 55 |          |  | Chairman of the Board and Chief Executive Officer                                    |  |  | October 1989  | 
|Morgan Gust       |  |     | 55 |          |  | President                                                                            |  |  | August 1990   | 
|C. Leroy Crow     |  |     | 52 |          |  | Executive Vice President of the Companys
    Refining Group Strategic Business Unit |  |  | February 2000 | 
|Carl D. Shook     |  |     | 64 |          |  | Executive Vice President of the Companys
    Refining Group Strategic Business Unit |  |  | February 2000 | 
|Jack W. Keller    |  |     | 58 |          |  | President of the Companys Phoenix Fuel
    Strategic Business Unit                  |  |  | February 1999 | 
|Miguel A. Foegal  |  |     | 50 |          |  | Executive Vice President of the Companys
    Retail Group Strategic Business Unit   |  |  | May 2000      | 
|S. Leland Gould   |  |     | 46 |          |  | Executive Vice President, Governmental Affairs
    and Real Estate                   |  |  | March 2002    | 
|Kim H. Bullerdick |  |     | 49 |          |  | Vice President, General Counsel, and Secretary                                       |  |  | February 1999 | 
|Mark B. Cox       |  |     | 44 |          |  | Vice President, Treasurer, Chief Financial
    Officer, and Assistant Secretary      |  |  | February 1999 | 
|Gary R. Dalke     |  |     | 50 |          |  | Vice President, Controller, Chief Accounting
    Officer, and Assistant Secretary    |  |  | February 1999 | 

Fred L. Holliger has served as a director of
the Company since October 1989 and as Chairman of the Board and
Chief Executive Officer of the Company since March 29,
2002. Mr. Holliger also serves as Chairman of the
Nominating Committee. From October 1989 to March 29, 2002,
Mr. Holliger was Executive Vice President and Chief
Operating Officer of the Company. Mr. Holliger joined Giant
Arizona as Senior Vice President, and President of the Giant
Arizona refining division, in February 1989. Mr. Holliger
also has served as the Chief Executive Officer of Phoenix Fuel
since it was acquired by Giant Arizona in June 1997.

14



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##### 



Morgan Gust has served as President of the
Company since March 29, 2002. From September 1998 to
March 29, 2002, Mr. Gust served as Executive Vice
President of the Company and Giant Arizona. Mr. Gust joined
the Company in August 1990, and over the years served in various
senior management positions for the Company and Giant Arizona,
including Vice President, Vice President Administration, General
Counsel, and Secretary.

C. Leroy Crow has served as Executive Vice
President of the Companys Refining Group Strategic
Business Unit and as Executive Vice President, Refining Group of
Giant Arizona since March 2000. From February 1999 to February
2000, Mr. Crow served as Senior Vice President, Refinery
Operations and Raw Material Supply for Giant Arizona. From
December 1997 to February 1999, Mr. Crow served as Senior
Vice President, Operations Division for Giant Arizona. From
February 1996 to June 1997, when it was acquired by Giant
Arizona, Mr. Crow served as the Vice President of
Operations for Phoenix Fuel. Following the acquisition,
Mr. Crow served as Vice President of Operations until
December 1997.

Carl D. Shook has served as Executive Vice
President of the Companys Refining Group Strategic
Business Unit and as Executive Vice President, Refining Group of
Giant Arizona since March 2000. From February 1999 to February
2000, Mr. Shook served as Senior Vice President,
Engineering and Technical Services for Giant Arizona. From
January 1998 to February 1999, Mr. Shook served as Vice
President, Engineering and Analysis for Giant Arizona. From
October 1996 until January 1998, Mr. Shook served as Vice
President, Corporate Planning and Evaluation for Giant Arizona.
From February 1995 until October 1996, Mr. Shook served as
Senior Vice President of Refinery Operations for Giant Arizona.

Jack W. Keller has served as the President
of the Companys Phoenix Fuel Strategic Business Unit since
its formation in February 1999. He also has served as the
President of Phoenix Fuel since Phoenix Fuel was acquired by
Giant Arizona in June 1997 and as Chief Operating Officer of
Phoenix Fuel since May 1998. From 1989 to June 1997,
Mr. Keller served in various senior management roles with
Phoenix Fuel, including President from December 1996 to June
1997, Chief Operating Officer from 1993 to 1996, and General
Manager from 1989 to 1993. From December 1997 to September 1998,
Mr. Keller also served as Senior Vice President, Marketing
Division of Giant Arizona.

Miguel A. Foegal has served as Executive
Vice President of the Companys Retail Group Strategic
Business Unit and as Executive Vice President, Retail Group of
Giant Arizona since May 2000. From March 1999 to May 2000,
Mr. Foegal served as Senior Vice President, Retail
Marketing for Giant Arizona. Mr. Foegal joined the Company
as Vice President, Retail Marketing in February 1998. From
January 1992 to February 1998, Mr. Foegal was a Regional
Vice President for Circle K/ Tosco Marketing Co., where he
was responsible for convenience and gas stores in the western
United States.

S. Leland Gould has served as Executive Vice
President, Governmental Affairs and Real Estate of the Company
and Giant Arizona since June 2002. From March 2002 to June 2002,
Mr. Gould served as Executive Vice President, Director of
Retail Operations of the Company and Giant Arizona.
Mr. Gould joined Giant Arizona in August 2000 as Vice
President, Strategic Business Development. Prior to August 2000,
Mr. Gould was Vice President and National Sales Manager for
Wolf Camera, a photo retail store chain with 800 stores
nationwide. Prior to that, Mr. Gould served as Vice
President of Fox Photo and CPI Corporation, a subsidiary of
Eastman Kodak, from May 1993 to July 1998.

Kim H. Bullerdick has served as Vice
President and Secretary of the Company and Giant Arizona since
December 1998 and General Counsel of the Company and Giant
Arizona since May 2000. From December 1998 to May 2000,
Mr. Bullerdick also was Legal Department Director of the
Company and Giant Arizona. From September 1998 to December 1998,
Mr. Bullerdick served as an Assistant Secretary of the
Company and Giant Arizona. Mr. Bullerdick joined Giant
Arizona in June 1987 as Corporate Counsel. In August 1995, he
was appointed Assistant General Counsel of Giant Arizona, and in
1998, he was appointed Associate General Counsel; Manager, Legal
Department; and Manager, Regulatory Affairs.

Mark B. Cox has served as Vice President,
Treasurer, Financial Officer and Assistant Secretary of the
Company and Giant Arizona since December 1998. On March 29,
2002, Mr. Cox was named Chief Financial Officer. From
September 1998 to December 1998, Mr. Cox served as
Treasurer and Assistant Secretary of the

15



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##### 



Company and Giant Arizona. From December 1996 to
September 1998, Mr. Cox served as Treasurer of the Company
and Giant Arizona. From October 1994 to December 1996,
Mr. Cox served as Assistant Treasurer of Giant Arizona.


Gary R. Dalke has served as Vice President,
Controller, Accounting Officer and Assistant Secretary of the
Company and Giant Arizona since December 1998. On March 29,
2002, Mr. Dalke was named Chief Accounting Officer. From
September 1998 to December 1998, Mr. Dalke served as an
Assistant Secretary of the Company and Giant Arizona. From April
1998 to September 1998, Mr. Dalke served as Chief
Information Officer of Giant Arizona, and from July 1998 to
December 1998, Mr. Dalke served as the Controller for Giant
Arizona. From January 1990 to June 1997 when it was acquired by
Giant Arizona, Mr. Dalke served as Chief Financial Officer
of Phoenix Fuel. From January 1997 to June 1997, Mr. Dalke
also was Vice President of Phoenix Fuel. Following the
acquisition, Mr. Dalke was Vice President and Chief
Financial Officer of Phoenix Fuel from June 1997 to July 1998,
and from June 1997 to September 1998; he also was Treasurer of
Phoenix Fuel.

16



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##### 



PART II



|        |                                                                              
|------- | -----------------------------------------------------------------------------
|Item 5. | Market For the Registrants Common
    Equity and Related Stockholder Matters

The principal United States market on which the
Companys common stock is traded is the New York Stock
Exchange. The high and low sales prices for the common stock for
each full quarterly period as reported on the New York Stock
Exchange Composite Tape for the last two fiscal years are as
follows:

|                   |  |      |       |     |  |   |      | 
|------------------ |  | ---- | ----- | --- |  | - | ---- | 
|Quarter Ended      |  | High |       | Low
|                   |  |      |       |    
|December 31, 2002  |  | $    | 3.85  |     |  | $ | 1.86 | 
|September 30, 2002 |  |      | 8.13  |     |  |   | 3.15 | 
|June 30, 2002      |  |      | 12.55 |     |  |   | 7.50 | 
|March 31, 2002     |  |      | 10.39 |     |  |   | 8.21 | 
|                  
|December 31, 2001  |  |      | 9.30  |     |  |   | 7.80 | 
|September 30, 2001 |  |      | 10.90 |     |  |   | 7.07 | 
|June 30, 2001      |  |      | 11.40 |     |  |   | 7.10 | 
|March 31, 2001     |  |      | 8.95  |     |  |   | 6.60 | 

The Companys Board of Directors suspended
the payment of cash dividends on common stock in the fourth
quarter of 1998. At the present time, the Company has no plans
to reinstate such dividends. The Board of Directors will
periodically review the Companys policy regarding the
payment of dividends. Any future dividends are subject to the
results of the Companys operations, declaration by the
Board of Directors, and existing debt covenants, as described
below.

The Company has issued $150,000,000 of
9% Senior Subordinated Notes due 2007 (the
9% Notes) and $200,000,000 of 11% Senior
Subordinated Notes due 2012 (the 11% Notes).
The 9% Notes were issued pursuant to an Indenture dated
August 26, 1997 (the 9% Indenture) and the
11% Notes were issued pursuant to an Indenture dated
May 14, 2002 (the 11% Indenture, and
collectively with the 9% Indenture, the
Indentures). Both Indentures are among the Company,
its subsidiaries, as guarantors, and The Bank of New York, as
trustee. The Indentures contain a number of covenants, which,
among other provisions, place restrictions on the Companys
payment of dividends and purchase of its common stock.

At December 31, 2002, retained earnings
available for dividends under the most restrictive terms of the
Indentures were approximately $11,830,000. The Company is,
however, unable to pay any dividends under the terms of its
Indentures because at December 31, 2002, and as of the date
hereof, the Company does not satisfy the Indentures
consolidated coverage ratio test.

Capitalized items used but not defined above have
the meaning assigned to them in the Indentures.

Also see the Capital Structure
discussion in Managements Discussion and Analysis of
Financial Condition and Results of Operations included in
Item 7.

There were 244 holders of record of Common
Stock on March 21, 2003.

17



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##### 



The following table includes information
regarding securities authorized for issuance under the
Companys equity compensation plans.

|                                                               |       |                         |         |                      |  |                                |      |      |  |  |   |   | 
|-------------------------------------------------------------- | ----- | ----------------------- | ------- | -------------------- |  | ------------------------------ | ---- | ---- |  |  | - | - | 
|                                                               |       |                         |         |                      |  | Number of securities remaining
|                                                               |       | Number of securities to |         | Weighted-average     |  | available for future issuance 
|                                                               |       | be issued upon exercise |         | exercise price of    |  | under equity compensation     
|                                                               |       | of outstanding options, |         | outstanding options, |  | plans (excluding securities   
|Plan category                                                  |       | warrants and rights     |         | warrants and rights  |  | reflected in column (a))      
|                                                               |       |                         |         |                      |  |                               
|                                                               |       | (a)                     |         | (b)                  |  | (c)                           
|Equity compensation plans approved by security
    holders     |       |                         | 552,050 |                      |  | $                              | 8.41 |      |  |  | * |  
|Equity compensation plans not approved by
    security holders |       |                         |        |                      |  |                                |     |      |  |  |  |  
|                                                               |       |                         |         |                      |  |                                |      |      |  |  |   |  
|                                                               | Total |                         |         | 552,050              |  |                                | $    | 8.41 |  |  |   | * | 
|                                                               |       |                         |         |                      |  |                                |      |      |  |  |   |  



---



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | The total number of shares available for grant is
    2% of the total number of common shares outstanding as of the
    first day of each calendar year. Grants also are subject to a
    400,000 share annual limitation on the number of common shares
    available for the grant of options that are intended to qualify
    as incentive stock options under Section 422 of
    the Internal Revenue Code. Common shares available for grant in
    any particular calendar year that are not, in fact, granted in
    such year cannot be added to the common shares available for
    grant in any subsequent calendar year.

For a description of the Companys equity
compensation plans see Note 16 to the Companys
Consolidated Financial Statements included in Item 8.

18



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##### 





|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

The following table summarizes recent financial
information of the Company. This selected financial data should
be read in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations in
Item 7, and the Consolidated Financial Statements, related
notes thereto, and the Independent Auditors Report
included in Item 8:

FINANCIAL AND OPERATING HIGHLIGHTS

|                                                           |                                                |                                                                  |         |           |   |      |         |         |   |      |         |           |   |   |         |         |  |   |         |         |  
|---------------------------------------------------------- | ---------------------------------------------- | ---------------------------------------------------------------- | ------- | --------- | - | ---- | ------- | ------- | - | ---- | ------- | --------- | - | - | ------- | ------- |  | - | ------- | ------- | -
|                                                           |                                                |                                                                 
|                                                           |                                                | Year Ended December 31,                                         
|                                                           |                                                |                                                                 
|                                                           |                                                | 2002                                                             |         | 2001      |   | 2000 |         | 1999    |   | 1998
|                                                           |                                                |                                                                  |         |           |   |      |         |         |   |     
|                                                           |                                                |                                                                 
|                                                           |                                                | (In thousands, except percentages, per share and operating data)
|Financial Statement Data                                   |                                                |                                                                  |         |           |   |      |         |         |   |      |         |           |   |   |         |         |  |   |         |        
|Continuing Operations:                                     |                                                |                                                                  |         |           |   |      |         |         |   |      |         |           |   |   |         |         |  |   |         |        
|                                                           | Net Revenues                                   |                                                                  | $       | 1,287,052 |   |      | $       | 951,344 |   |      | $       | 1,057,619 |   |   | $       | 762,464 |  |   | $       | 622,469 |  
|                                                           | Operating Income                               |                                                                  |         | 19,033    |   |      |         | 43,952  |   |      |         | 34,711    |   |   |         | 37,238  |  |   |         | 17,943  |  
|                                                           | Net Earnings (Loss)                            |                                                                  |         | (12,013   | ) |      |         | 12,767  |   |      |         | 7,369     |   |   |         | 10,682  |  |   |         | (3,396  | )
|                                                           | Earnings (Loss) Per Common Share  Basic       |                                                                  | $       | (1.40     | ) |      | $       | 1.44    |   |      | $       | 0.80      |   |   | $       | 1.00    |  |   | $       | (0.31   | )
|                                                           | Earnings (Loss) Per Common Share 
    Diluted |                                                                  | $       | (1.40     | ) |      | $       | 1.43    |   |      | $       | 0.80      |   |   | $       | 1.00    |  |   | $       | (0.31   | )
|Discontinued Operations:                                   |                                                |                                                                  |         |           |   |      |         |         |   |      |         |           |   |   |         |         |  |   |         |        
|                                                           | Net Revenues                                   |                                                                  | $       | 26,010    |   |      | $       | 40,335  |   |      | $       | 41,741    |   |   | $       | 30,719  |  |   | $       | 22,035  |  
|                                                           | Operating Income (Loss)                        |                                                                  |         | 4,576     |   |      |         | (643    | ) |      |         | (134      | ) |   |         | 159     |  |   |         | 1,964   |  
|                                                           | Net Earnings (Loss)                            |                                                                  |         | 2,746     |   |      |         | (386    | ) |      |         | (80       | ) |   |         | 96      |  |   |         | 1,179   |  
|                                                           | Earnings (Loss) Per Common Share  Basic       |                                                                  | $       | 0.32      |   |      | $       | (0.04   | ) |      | $       | (0.01     | ) |   | $       | 0.01    |  |   | $       | 0.11    |  
|                                                           | Earnings (Loss) Per Common Share 
    Diluted |                                                                  | $       | 0.32      |   |      | $       | (0.04   | ) |      | $       | (0.01     | ) |   | $       | 0.01    |  |   | $       | 0.11    |  
|Weighted Average Common Shares
    Outstanding  Basic     |                                                |                                                                  | 8,566   |           |   |      | 8,871   |         |   |      | 9,214   |           |   |   | 10,679  |         |  |   | 10,951  |        
|Weighted Average Common Shares
    Outstanding  Diluted   |                                                |                                                                  | 8,566   |           |   |      | 8,885   |         |   |      | 9,223   |           |   |   | 10,719  |         |  |   | 10,951  |        
|Dividends Paid Per Common Share                            |                                                | $                                                                |        |           |   | $    |        |         |   | $    |        |           |   | $ |        |         |  | $ | 0.20    |        
|Working Capital                                            |                                                | $                                                                | 91,568  |           |   | $    | 56,279  |         |   | $    | 53,717  |           |   | $ | 48,755  |         |  | $ | 88,537  |        
|Total Assets                                               |                                                |                                                                  | 702,286 |           |   |      | 507,174 |         |   |      | 528,565 |           |   |   | 546,799 |         |  |   | 527,414 |        
|Long-Term Debt                                             |                                                |                                                                  | 398,069 |           |   |      | 256,749 |         |   |      | 258,009 |           |   |   | 258,272 |         |  |   | 282,484 |        
|Stockholders Equity                                       |                                                |                                                                  | 127,317 |           |   |      | 136,410 |         |   |      | 127,703 |           |   |   | 132,462 |         |  |   | 127,702 |        
|Long-Term Debt as a Percentage of Total
    Capitalization |                                                |                                                                  | 75.8    | %         |   |      | 65.3    | %       |   |      | 66.9    | %         |   |   | 66.1    | %       |  |   | 68.9    | %      
|Book Value Per Common Share                                |                                                | $                                                                | 14.85   |           |   | $    | 15.95   |         |   | $    | 14.27   |           |   | $ | 12.86   |         |  | $ | 11.78   |        
|Return on Average Stockholders Equity                     |                                                |                                                                  |        |           |   |      | 9.4     | %       |   |      | 5.6     | %         |   |   | 8.3     | %       |  |   |        |        

19



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##### 



|                  |                                               |                                                                       |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |         |  
|----------------- | --------------------------------------------- | --------------------------------------------------------------------- | - | ------- | ------- | ---- | - | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                  |                                               |                                                                      
|                  |                                               | Year Ended December 31,                                              
|                  |                                               |                                                                      
|                  |                                               | 2002                                                                  |   | 2001    |         | 2000 |   | 1999    |         | 1998
|                  |                                               |                                                                       |   |         |         |      |   |         |         |     
|                  |                                               |                                                                      
|                  |                                               | (In thousands, except percentages, per share and operating data)     
|Operating Data(1) |                                               |                                                                       |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |        
|Refining Group:   |                                               |                                                                       |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |        
|                  | Four Corners Operations:                      |                                                                       |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|                  | Rated Crude Oil Capacity Utilized             |                                                                       |   | 72      | %       |      |   | 73      | %       |      |   | 80      | %       |   |   | 87      | %       |   |   | 88      | %      
|                  | Refinery Sourced Sales Barrels (Bbls/ Day)    |                                                                       |   | 31,907  |         |      |   | 32,025  |         |      |   | 34,287  |         |   |   | 37,368  |         |   |   | 37,898  |        
|                  | Average Crude Oil Costs ($/ Bbl)              |                                                                       | $ | 23.62   |         |      | $ | 25.00   |         |      | $ | 29.26   |         |   | $ | 17.64   |         |   | $ | 14.29   |        
|                  | Refinery Margin ($/ Bbl)                      |                                                                       | $ | 6.84    |         |      | $ | 9.69    |         |      | $ | 7.63    |         |   | $ | 6.89    |         |   | $ | 4.83    |        
|                  | Yorktown Operations: (2)                      |                                                                       |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|                  | Rated Crude Oil Capacity Utilized             |                                                                       |   | 86      | %       |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|                  | Refinery Sourced Sales Barrels (Bbls/ Day)    |                                                                       |   | 58,771  |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|                  | Average Crude Oil Costs ($/ Bbl)              |                                                                       | $ | 27.01   |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|                  | Refinery Margin ($/ Bbl)                      |                                                                       | $ | 2.32    |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|Retail Group:     |                                               |                                                                       |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |        
|                  | Service Stations: (Continuing
    Operations) |                                                                       |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|                  |                                               | Fuel Gallons Sold (In Thousands)                                      |   |         | 152,735 |      |   |         | 162,423 |      |   |         | 181,113 |   |   |         | 185,605 |   |   |         | 163,612 |  
|                  |                                               | Product Margin ($/ Gallon)                                            |   | $       | 0.156   |      |   | $       | 0.172   |      |   | $       | 0.167   |   |   | $       | 0.181   |   |   | $       | 0.207   |  
|                  |                                               | Merchandise Sold ($ In Thousands)                                     |   | $       | 125,828 |      |   | $       | 125,613 |      |   | $       | 120,495 |   |   | $       | 102,816 |   |   | $       | 88,757  |  
|                  |                                               | Merchandise Margin                                                    |   |         | 27      | %    |   |         | 28      | %    |   |         | 28      | % |   |         | 28      | % |   |         | 30      | %
|                  | Operating Retail Outlets at Year
    End:     |                                                                       |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|                  |                                               | Continuing Operations                                                 |   |         | 129     |      |   |         | 130     |      |   |         | 159     |   |   |         | 153     |   |   |         | 149     |  
|                  |                                               | Discontinued Operations                                               |   |         | 6       |      |   |         | 20      |      |   |         | 20      |   |   |         | 19      |   |   |         | 17      |  
|                  | Travel Center:                                |                                                                       |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        
|                  |                                               | Fuel Gallons Sold (In Thousands)                                      |   |         | 24,906  |      |   |         | 24,964  |      |   |         | 26,698  |   |   |         | 27,991  |   |   |         | 24,950  |  
|                  |                                               | Product Margin ($/ Gallon)                                            |   | $       | 0.094   |      |   | $       | 0.103   |      |   | $       | 0.104   |   |   | $       | 0.111   |   |   | $       | 0.111   |  
|                  |                                               | Merchandise Sold ($ In Thousands)                                     |   | $       | 6,103   |      |   | $       | 6,128   |      |   | $       | 6,719   |   |   | $       | 7,291   |   |   | $       | 7,331   |  
|                  |                                               | Merchandise Margin                                                    |   |         | 44      | %    |   |         | 44      | %    |   |         | 46      | % |   |         | 45      | % |   |         | 45      | %
|                  |                                               | Number of Outlets at Year End                                         |   |         | 1       |      |   |         | 1       |      |   |         | 1       |   |   |         | 1       |   |   |         | 1       |  
|                  |                                               | Retail Fuel Volumes Sold as a % of Refinery
    Sourced Sales Barrels |   |         | 40      | %    |   |         | 43      | %    |   |         | 45      | % |   |         | 42      | % |   |         | 36      | %
|Phoenix Fuel:     |                                               |                                                                       |   |         |         |      |   |         |         |      |   |         |         |   |   |         |         |   |   |        
|                  | Fuel Gallons Sold (In Thousands)              |                                                                       |   | 376,711 |         |      |   | 394,158 |         |      |   | 424,290 |         |   |   | 351,949 |         |   |   | 314,763 |        
|                  | Product Margin ($/ Gallon)                    |                                                                       | $ | 0.054   |         |      | $ | 0.050   |         |      | $ | 0.052   |         |   | $ | 0.064   |         |   | $ | 0.067   |        
|                  | Lubricant Sales ($ In Thousands)              |                                                                       | $ | 21,544  |         |      | $ | 22,347  |         |      | $ | 24,210  |         |   | $ | 22,067  |         |   | $ | 22,517  |        
|                  | Lubricant Margin                              |                                                                       |   | 17      | %       |      |   | 17      | %       |      |   | 16      | %       |   |   | 15      | %       |   |   | 14      | %      



---



|    |                                                                                              
|--- | ---------------------------------------------------------------------------------------------
|(1) | Operating data includes the operations of various
    Retail Group acquisitions made in 1998.
|   
|(2) | Acquired on May 14, 2002.                                                                    

20



---



##### 





|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

Critical Accounting Policies

Inherent in the preparation of the Companys
financial statements are the selection and application of
certain accounting principles, policies, and procedures that
affect the amounts that are reported. In order to apply these
principles, policies, and procedures, the Company must make
judgments, assumptions, and estimates based on the best
available information at the time. Actual results may differ
based on the accuracy of the information utilized and subsequent
events, some of which the Company may have little or no control
over. In addition, the methods used in applying the above may
result in amounts that differ considerably from those that would
result from the application of other acceptable methods.

The Companys significant accounting
policies are described in Note 1 to the Companys
Consolidated Financial Statements included in Item 8.
Certain critical accounting policies that materially affect the
amounts recorded in the consolidated financial statements are
the use of the last in, first-out (LIFO) method of
valuing certain inventories, the accounting for certain
environmental remediation liabilities, the accounting for
certain related party transactions, and assessing the possible
impairment of certain long-lived assets.

LIFO Inventories

As described in Note 1, the Companys
inventories are stated at the lower of cost or market. Costs for
crude oil and refined products produced by the refineries, and
lubricants and other merchandise of Phoenix Fuel, are determined
by the LIFO method. Under this method, the most recent
acquisition costs are charged to cost of sales, and inventories
are valued at the earliest acquisition costs. The Company
selected this method because it believed it more accurately
reflects the cost of the Companys current sales. The use
of this method results in reported earnings that can differ
significantly from those that might be reported under a
different inventory method such as the first-in, first-out
(FIFO) method. Under the FIFO method, the earliest
acquisition costs are charged to cost of sales and inventories
are valued at the latest acquisition costs. If inventories had
been determined using the FIFO method at December 31, 2002,
2001, and 2000, net earnings and diluted earnings per share for
the years ended December 31, 2002, 2001, and 2000 would
have been higher (lower) by $7,401,000 and $0.86,
$(6,981,000) and $(0.79), and $2,935,000 and $.32, respectively.
In addition, the use of the LIFO inventory method may result in
increases or decreases to cost of sales in years that inventory
volumes decline as the result of charging cost of sales with
LIFO inventory costs generated in prior periods. For the years
ended December 31, 2002, 2001, and 2000, cost of sales were
lower by $1,100,000, $231,000 and $1,737,000 because of declines
in inventory volumes.

In periods of rapidly declining prices, LIFO
inventories may have to be written down to market value due to
the higher costs assigned to LIFO volumes in prior periods.
Market value is determined based on estimated selling prices
less applicable refining, transportation and other selling
costs, generally for the month subsequent to the end of the
reporting period. For the year ended December 31, 2001,
declining prices resulted in the write-down of inventory values
by approximately $3,302,000. For the years ended
December 31, 2002 and 2000, there were no LIFO inventory
market value write-downs.

Environmental Remediation
Liabilities

The Company has recorded various environmental
remediation liabilities described in more detail in Note 18
to the Companys Consolidated Financial Statements in
Item 8. These liabilities result for the most part from
past operations, including liabilities associated with past
operations arising out of changes in environmental laws, and
liabilities assumed in connection with acquired assets. The
Company is conducting remediation activities in connection with
these matters, including investigation, sampling, cleanup,
disposal, and monitoring. Such liabilities are recorded when
environmental assessments and/or remedial efforts are probable
and the costs can be reasonably estimated. Environmental
liabilities are not discounted to their present value and are
recorded without consideration of potential recoveries from
third parties. The Company employs independent consultants or
its own internal environmental personnel to investigate and
assemble pertinent facts, recommend an appropriate remediation
plan in light of regulatory standards, assist in

21



---



##### 



estimating remediation costs based on existing
technologies, and complete remediation according to approved
plans. When consultants are not utilized, the Company estimates
remediation costs based on the knowledge and experience of
Company employees having responsibility for the remediation
project. Because of the amount of uncertainty involved in the
Companys various remediation efforts and the period of
time such efforts may take to complete, estimates are based on
current regulatory standards. The Company updates its estimates
as needed to reflect changes in factual information, available
technology, or applicable laws and regulations. Subsequent
adjustments to estimates, which may be significant, often occur
as more information becomes available, as the requirements of
government agencies are changed or clarified, or as other
circumstances change.


Related Party Transactions

The Company has an outstanding loan to
James E. Acridge, its former Chairman, President, and Chief
Executive Officer (the Former CEO), as more fully
described in Note 7 to the Companys Consolidated
Financial Statements in Item 8. As discussed in
Note 7, at December 31, 2002 and 2001, the Company had
fully reserved for the Note and related accrued interest.

Impairment of Long-Lived Assets

The Company reviews the carrying values of its
long-lived assets for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of
the assets to be held and used may not be recoverable. For
assets to be disposed of, the Company reports long-lived assets
at the lower of the carrying amount or fair value less cost to
sell. During 2002 and 2001, the Company recorded impairment
write-downs of $641,000 and $926,000, respectively, relating to
assets sold or held for disposal. Additionally, the Company has
several operating service station/ convenience stores that are
being marketed for potential sale if acceptable offers are
received. These operating stores were evaluated for impairment
using an undiscounted cash flow methodology. The sum of expected
future cash flows for certain of the stores was less than the
carrying value; accordingly impairment losses of $1,082,000 and
$1,293,000 based on estimated fair market values were recorded
in 2002 and 2001, respectively. In determining the amount of
these write-downs, the fair market value estimates used were
based upon either internally prepared estimates based on
comparable sales or sales offers received. In addition,
write-downs of $500,000 were recorded for other impairments in
2001. Changes in current economic conditions, assumptions
regarding the timing and amounts of cash flows, or fair market
value estimates could result in additional write-downs of these
assets in the future.

22



---



##### 



Results of Operations

Included below are certain operating results and
operating data for the Company and for the Companys
operating segments.

|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |      |       |  
|------------------------------------------------------------------ | -------------------------------------------------- | ------------------------------------- | --------- | ------ | ----- | ---- | ------- | ---- | ----- | - | --------- | ---- | ----- | -
|                                                                   |                                                    |                                      
|                                                                   |                                                    | Year Ended December 31,              
|                                                                   |                                                    |                                      
|                                                                   |                                                    | 2002                                  |           | 2001   |       | 2000
|                                                                   |                                                    |                                       |           |        |       |     
|                                                                   |                                                    |                                      
|                                                                   |                                                    | (In thousands, except per share data)
|Net revenues                                                       |                                                    | $                                     | 1,287,052 |        |       | $    | 951,344 |      |       | $ | 1,057,619 |     
|Cost of products sold                                              |                                                    |                                       | 1,073,013 |        |       |      | 728,699 |      |       |   | 850,464   |     
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|Gross margin                                                       |                                                    |                                       | 214,039   |        |       |      | 222,645 |      |       |   | 207,155   |     
|Operating expenses                                                 |                                                    |                                       | 134,276   |        |       |      | 107,431 |      |       |   | 115,345   |     
|Depreciation and amortization                                      |                                                    |                                       | 36,064    |        |       |      | 31,857  |      |       |   | 31,739    |     
|Selling, general and administrative expenses                       |                                                    |                                       | 24,550    |        |       |      | 27,864  |      |       |   | 25,373    |     
|Net (gain) loss on the disposal/write-down
    of assets           |                                                    |                                       | 116       |        |       |      | 6,132   |      |       |   | (13       | )   
|Allowance for related party note and interest
    receivable       |                                                    |                                       |          |        |       |      | 5,409   |      |       |   |          |     
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|Operating income                                                   |                                                    |                                       | 19,033    |        |       |      | 43,952  |      |       |   | 34,711    |     
|Interest expense                                                   |                                                    |                                       | (36,308   | )      |       |      | (24,098 | )    |       |   | (24,411   | )   
|Amortization/write-off of financing costs                          |                                                    |                                       | (3,256    | )      |       |      | (764    | )    |       |   | (818      | )   
|Interest and investment income                                     |                                                    |                                       | 432       |        |       |      | 1,661   |      |       |   | 1,989     |     
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|Earnings (loss) from continuing operations
    before income taxes |                                                    |                                       | (20,099   | )      |       |      | 20,751  |      |       |   | 11,471    |     
|Provision (benefit) for income taxes                               |                                                    |                                       | (8,086    | )      |       |      | 7,984   |      |       |   | 4,102     |     
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|Earnings (loss) from continuing operations                         |                                                    |                                       | (12,013   | )      |       |      | 12,767  |      |       |   | 7,369     |     
|Discontinued operations (Note 5)                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|                                                                   | Loss from operations of discontinued retail assets |                                       |           | (1,434 | )     |      |         | (563 | )     |   |           | (134 | )    
|                                                                   | Gain on disposal                                   |                                       |           | 6,464  |       |      |         |     |       |   |           |     |      
|                                                                   | Net loss on asset sales/write-downs                |                                       |           | (454   | )     |      |         | (80  | )     |   |           |     |      
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|                                                                   |                                                    |                                       | 4,576     |        |       |      | (643    | )    |       |   | (134      | )   
|                                                                   | Provision (benefit) for income taxes               |                                       |           | 1,830  |       |      |         | (257 | )     |   |           | (54  | )    
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|                                                                   | Earnings (loss) from discontinued operations       |                                       |           | 2,746  |       |      |         | (386 | )     |   |           | (80  | )    
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|Net earnings (loss)                                                |                                                    | $                                     | (9,267    | )      |       | $    | 12,381  |      |       | $ | 7,289     |     
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|Net earnings (loss) per common share:                              |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|                                                                   | Basic                                              |                                       |           |        |       |      |         |      |       |   |           |      |      
|                                                                   |                                                    | Continuing operations                 |           | $      | (1.40 | )    |         | $    | 1.44  |   |           | $    | 0.80  |  
|                                                                   |                                                    | Discontinued operations               |           |        | 0.32  |      |         |      | (0.04 | ) |           |      | (0.01 | )
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|                                                                   |                                                    | $                                     | (1.08     | )      |       | $    | 1.40    |      |       | $ | 0.79      |     
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|                                                                   | Assuming dilution                                  |                                       |           |        |       |      |         |      |       |   |           |      |      
|                                                                   |                                                    | Continuing operations                 |           | $      | (1.40 | )    |         | $    | 1.43  |   |           | $    | 0.80  |  
|                                                                   |                                                    | Discontinued operations               |           |        | 0.32  |      |         |      | (0.04 | ) |           |      | (0.01 | )
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|                                                                   |                                                    | $                                     | (1.08     | )      |       | $    | 1.39    |      |       | $ | 0.79      |     
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     

23



---



##### 



|                                  |                                                              |                                       |   |           |         |      |   |          |         |  |   |           |         | 
|--------------------------------- | ------------------------------------------------------------ | ------------------------------------- | - | --------- | ------- | ---- | - | -------- | ------- |  | - | --------- | ------- | 
|                                  |                                                              |                                      
|                                  |                                                              | Year Ended December 31,              
|                                  |                                                              |                                      
|                                  |                                                              | 2002                                  |   | 2001      |         | 2000
|                                  |                                                              |                                       |   |           |         |     
|                                  |                                                              |                                      
|                                  |                                                              | (In thousands, except per share data)
|Net revenues:(1)                  |                                                              |                                       |   |           |         |      |   |          |         |  |   |          
|                                  | Refining Group:                                              |                                       |   |           |         |      |   |          |         |  |   |           |        
|                                  |                                                              | Four Corners operations               |   | $         | 429,139 |      |   | $        | 473,226 |  |   | $         | 543,170 | 
|                                  |                                                              | Yorktown operations(2)                |   |           | 409,390 |      |   |          |        |  |   |           |        | 
|                                  | Retail Group                                                 |                                       |   | 320,659   |         |      |   | 350,044  |         |  |   | 379,598   |        
|                                  | Phoenix Fuel                                                 |                                       |   | 349,934   |         |      |   | 391,172  |         |  |   | 443,224   |        
|                                  | Other                                                        |                                       |   | 180       |         |      |   | 244      |         |  |   | 367       |        
|                                  | Intersegment                                                 |                                       |   | (222,250  | )       |      |   | (263,342 | )       |  |   | (308,740  | )      
|                                  |                                                              |                                       |   |           |         |      |   |          |         |  |   |          
|                                  | Net revenues of continuing operations                        |                                       |   | 1,287,052 |         |      |   | 951,344  |         |  |   | 1,057,619 |        
|                                  | Net revenues of discontinued operations                      |                                       |   | 26,010    |         |      |   | 40,335   |         |  |   | 41,741    |        
|                                  |                                                              |                                       |   |           |         |      |   |          |         |  |   |          
|                                  | Total net revenues                                           |                                       | $ | 1,313,062 |         |      | $ | 991,679  |         |  | $ | 1,099,360 |        
|                                  |                                                              |                                       |   |           |         |      |   |          |         |  |   |          
|Income (loss) from operations:(1) |                                                              |                                       |   |           |         |      |   |          |         |  |   |          
|                                  | Refining Group                                               |                                       |   |           |         |      |   |          |         |  |   |           |        
|                                  |                                                              | Four Corners operations               |   | $         | 30,822  |      |   | $        | 66,148  |  |   | $         | 45,661  | 
|                                  |                                                              | Yorktown operations(2)                |   |           | (6,388  | )    |   |          |        |  |   |           |        | 
|                                  | Retail Group                                                 |                                       |   | 4,683     |         |      |   | 5,777    |         |  |   | 296       |        
|                                  | Phoenix Fuel                                                 |                                       |   | 7,014     |         |      |   | 4,731    |         |  |   | 7,260     |        
|                                  | Other                                                        |                                       |   | (16,982   | )       |      |   | (21,163  | )       |  |   | (18,519   | )      
|                                  | Net gain (loss) on disposal/write-down of
    assets         |                                       |   | (116      | )       |      |   | (6,132   | )       |  |   | 13        |        
|                                  | Allowance for related party note and interest
    receivable |                                       |   |          |         |      |   | (5,409   | )       |  |   |          |        
|                                  |                                                              |                                       |   |           |         |      |   |          |         |  |   |          
|                                  | Operating income from continuing operations                  |                                       |   | 19,033    |         |      |   | 43,952   |         |  |   | 34,711    |        
|                                  | Operating income (loss) from discontinued
    operations     |                                       |   | 4,576     |         |      |   | (643     | )       |  |   | (134      | )      
|                                  |                                                              |                                       |   |           |         |      |   |          |         |  |   |          
|                                  | Total income from operations                                 |                                       | $ | 23,609    |         |      | $ | 43,309   |         |  | $ | 34,577    |        
|                                  |                                                              |                                       |   |           |         |      |   |          |         |  |   |          



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Refining Group operates the Companys
    three refineries, its crude oil gathering pipeline system, two
    finished products distribution terminals, and a fleet of crude
    oil and finished product truck transports. The Retail Group
    consists of service stations with convenience stores or kiosks
    and one travel center. Phoenix Fuel is a wholesale petroleum
    products distribution operation, which includes several
    lubricant and bulk petroleum distribution plants, an unmanned
    fleet fueling (cardlock) operation, a bulk lubricant
    terminal facility, and a fleet of finished product and lubricant
    delivery trucks. The Other category is primarily corporate staff
    operations.
|   
|(2) | Acquired May 14, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

24



---



##### 



|                                          |                                |                                      |         |         |        |      |         |         |        |  |         |         |        | 
|----------------------------------------- | ------------------------------ | ------------------------------------ | ------- | ------- | ------ | ---- | ------- | ------- | ------ |  | ------- | ------- | ------ | 
|                                          |                                |                                     
|                                          |                                | Year Ended December 31,             
|                                          |                                |                                     
|                                          |                                | 2002                                 |         | 2001    |        | 2000
|                                          |                                |                                      |         |         |        |     
|Refining Group Operating Data:            |                                |                                      |         |         |        |      |         |         |        |  |         |        
|                                          | Four Corners Operations:       |                                      |         |         |        |      |         |         |        |  |         |         |       
|                                          |                                | Crude Oil/ NGL Throughput (BPD)      |         |         | 32,535 |      |         |         | 33,167 |  |         |         | 35,359 | 
|                                          |                                | Refinery Sourced Sales Barrels (BPD) |         |         | 31,907 |      |         |         | 32,025 |  |         |         | 34,287 | 
|                                          |                                | Average Crude Oil Costs ($/ Bbl)     |         | $       | 23.62  |      |         | $       | 25.00  |  |         | $       | 29.26  | 
|                                          |                                | Refining Margins ($/ Bbl)            |         | $       | 6.84   |      |         | $       | 9.69   |  |         | $       | 7.63   | 
|                                          | Yorktown Operations:           |                                      |         |         |        |      |         |         |        |  |         |         |       
|                                          |                                | Crude Oil/ NGL Throughput (BPD)      |         |         | 57,297 |      |         |         |        |  |         |         |        | 
|                                          |                                | Refinery Sourced Sales Barrels (BPD) |         |         | 58,771 |      |         |         |        |  |         |         |        | 
|                                          |                                | Average Crude Oil Costs ($/ Bbl)     |         | $       | 27.01  |      |         |         |        |  |         |         |        | 
|                                          |                                | Refining Margins ($/ Bbl)            |         | $       | 2.32   |      |         |         |        |  |         |         |        | 
|Retail Group Operating Data:              |                                |                                      |         |         |        |      |         |         |        |  |         |        
|(Continuing operations only)              |                                |                                      |         |         |        |      |         |         |        |  |         |        
|Fuel Gallons Sold (000s)                 |                                |                                      | 177,641 |         |        |      | 187,387 |         |        |  | 207,811 |        
|                                          | Fuel Margins ($/gal)           |                                      | $       | 0.1471  |        |      | $       | 0.1627  |        |  | $       | 0.1590  |       
|                                          | Merchandise Sales ($ in 000s) |                                      | $       | 131,931 |        |      | $       | 131,741 |        |  | $       | 127,214 |       
|                                          | Merchandise Margins            |                                      |         | 27.8    | %      |      |         | 28.8    | %      |  |         | 29.0    | %     
|Operating Retail Outlets at Year
    End: |                                |                                      |         |         |        |      |         |         |        |  |         |        
|                                          | Continuing Operations          |                                      |         | 130     |        |      |         | 131     |        |  |         | 160     |       
|                                          | Discontinued Operations        |                                      |         | 6       |        |      |         | 20      |        |  |         | 20      |       
|Phoenix Fuel Operating Data:              |                                |                                      |         |         |        |      |         |         |        |  |         |        
|                                          | Fuel Gallons Sold (000s)      |                                      |         | 376,711 |        |      |         | 394,158 |        |  |         | 424,290 |       
|                                          | Fuel Margins ($/gal)           |                                      | $       | 0.0539  |        |      | $       | 0.0498  |        |  | $       | 0.0524  |       
|                                          | Lubricant Sales ($ in 000s)   |                                      | $       | 21,544  |        |      | $       | 22,347  |        |  | $       | 24,210  |       
|                                          | Lubricant Margins              |                                      |         | 16.7    | %      |      |         | 16.6    | %      |  |         | 16.4    | %     

Certain factors affecting the Companys
operations for the year ended December 31, 2002, include,
among other things, the following:



| |   |                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The acquisition of the Yorktown refinery on
    May 14, 2002. Shortly after the acquisition, the Yorktown
    refinery experienced three significant unscheduled unit
    shutdowns, the last of which occurred on July 23, 2002.
    These shutdowns impacted the yield of high value products, as
    well as crude oil charge rates.
|
| |  | Weaker refining margins at the Companys
    refineries due to, among other things, high nationwide
    inventories of distillates; an increase in imported finished
    products; and higher crude values due to worldwide crude oil
    production levels, Middle East tensions and the labor strike in
    Venezuela.               
|
| |  | A significantly greater volume of products
    produced and sold by the Yorktown refinery as compared to its
    other operations, results in the Company having a much larger
    exposure to volatile refinery margins, which will positively or
    negatively affect the Companys profitability.                                  
|
| |  | Continuing decline in Four Corners crude oil
    supplies.                                                                                                                                                                                                                                                                             
|
| |  | Competitive conditions in the Companys
    Phoenix and Tucson retail markets due to increased price
    competition.                                                                                                                                                                                                                  
|
| |  | Net gains of $7,865,000 on the sale of various
    retail units, excess land and other assets, offset in part by
    impairment write-downs and other write-offs of $1,971,000.
    Included in these amounts are net gains on                                                                                                         

25



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##### 



| |   |                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | the disposal of 11 retail units of $6,464,000 and
    impairment write-downs and other write-offs of $454,000 included
    in discontinued operations.                                                                                                                                                                                                                        
|
| |  | The fourth quarter of 2002 showed a general
    improvement in refining margins and finished product margins,
    for all segments of the Companys operations, compared to
    those posted for most of the three previous quarters of 2002.
    This resulted in a significant improvement in operating earnings
    for the fourth quarter compared to prior 2002 quarters.

Comparison of the Years Ended
December 31, 2002 and December 31, 2001



| |                                                                   
| | ------------------------------------------------------------------
| | Earnings (Loss) From Continuing Operations
    Before Income Taxes

For the year ended December 31, 2002, the
Company incurred a loss before income taxes of $20,099,000,
compared to earnings before income taxes of $20,751,000 for the
year ended December 31, 2001. The decrease includes the
following items related to the operation and acquisition of the
Yorktown refinery: (i) an operating loss of $6,388,000;
(ii) an increase in the amortization of financing costs of
$2,492,000; and (iii) additional interest expense of
$12,210,000. In addition, impairment losses, related to certain
retail units, and other asset write-offs of $1,517,000 were
recorded. The remainder of the decrease, relating to the
Companys other operations, was primarily due to a 29%
decline in Four Corners refinery margins, due in part to higher
than normal margins in 2001. Also contributing to the decrease
was a 5% decrease in retail fuel volumes sold, a 10% decrease in
retail fuel margins, and a 3% decline in retail merchandise
margins. Four Corners refinery fuel volumes sold were relatively
flat year-to-year. These decreases were offset in part by a 2%
increase in wholesale fuel volumes sold by Phoenix Fuel to
third-party customers, an 8% increase in Phoenix Fuel fuel
margins, reduced operating expenses, lower SG&A expenses for
other Company operations, and net gains of $1,401,000 primarily
from the sale of certain retail service stations and excess land.

For 2001, earnings before income taxes were
reduced by $6,132,000 as the result of losses on the
disposal/write-down of various refining and retail assets and by
$5,409,000 due to the recording of a reserve for a note and
interest receivable from the Companys Former CEO as
discussed in Note 7 to the Companys Consolidated Financial
Statements in Item 8.



| |                                        
| | ---------------------------------------
| | Revenues from Continuing
    Operations

Revenues for the year ended December 31,
2002, increased approximately $335,708,000 or 35% to
$1,287,052,000 from $951,344,000 in the comparable 2001 period.
The increase includes additional revenues for the Yorktown
refinery of $409,390,000. Revenue decreases relating to the
Companys other operations were primarily due to a 10%
decline in Four Corners refining weighted average selling
prices, a 7% decrease in retail refined product selling prices
and a 5% decline in retail fuel volumes sold. Overall retail
merchandise sales were up slightly, while same store merchandise
sales were up approximately 5%.

The volumes of refined products sold through the
Companys retail units decreased approximately 5% from
period to period. The volume declines were primarily related to
the sale or closure of 29 retail units since the end of 2000 and
reduced volumes from stores in the Companys Phoenix market
area due to increased price competition. The volume of finished
product sold from retail units that were in operation for a full
year was up approximately 2%, in spite of reduced volumes from
stores in the Companys Phoenix market area. Excluding the
Phoenix stores, volumes were up approximately 5%. Volumes sold
from the Companys travel center were relatively flat.



| |                                                     
| | ----------------------------------------------------
| | Cost of Products Sold from Continuing
    Operations

For the year ended December 31, 2002, cost
of products sold increased approximately $344,314,000 or 47% to
$1,073,013,000 from $728,699,000 in the comparable 2001 period.
The increase includes additional cost of products sold for the
Yorktown refinery of $377,307,000. Cost of products sold
decreases relating to the Companys other operations were
primarily due to a 4% decline in the cost of finished products
purchased by Phoenix Fuel and a 6% decline in Four Corners
refining weighted average crude oil costs. Cost of products sold

26



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##### 



also includes a loss of approximately $1,637,000
from crude oil futures contracts used to economically hedge
crude oil inventories and crude oil purchases for the Yorktown
refinery.


For 2002 and 2001, certain lower cost refinery
LIFO inventory layers were liquidated which resulted in a
decrease in the cost of products sold of approximately
$1,100,000 and $231,000, respectively.



| |                                                  
| | -------------------------------------------------
| | Operating Expenses from Continuing
    Operations

For the year ended December 31, 2002,
operating expenses increased approximately $26,845,000 or 25% to
$134,276,000 from $107,431,000 in the comparable 2001 period.
The increase includes operating expenses relating to the
Yorktown refinery of $32,832,000. Operating expense decreases
relating to the Companys other operations were due to,
among other things, lower lease expense due to the repurchase of
59 retail units from FFCA Capital Holding Corporation
(FFCA) in July 2001 that had been sold to FFCA as
part of a sale-leaseback transaction between the Company and
FFCA in December 1998; reduced expenses for payroll and related
costs, and other operating expenses, for retail operations, due
in part to the sale or closure of 29 retail units since the
end of 2000, as well as the implementation of certain cost
reduction programs; and lower repair and maintenance
expenditures for refinery operations. These decreases were
offset in part by higher general insurance premiums and higher
purchased fuel costs for the Four Corners refineries.



| |                                                             
| | ------------------------------------------------------------
| | Depreciation and Amortization from
    Continuing Operations

For the year ended December 31, 2002,
depreciation and amortization increased approximately $4,207,000
or 13% to $36,064,000 from $31,857,000 in the comparable 2001
period. The increase includes depreciation and amortization
relating to the Yorktown refinery of $4,493,000. Depreciation
and amortization increases relating to the Companys other
operations were primarily related to additional depreciation
expense related to the repurchase of 59 retail units from FFCA
in July 2001; construction, remodeling and upgrades in retail
and refining operations during 2001 and 2002; and higher
refinery amortization costs in 2002 due to a 2001 revision in
the estimated amortization period for certain refinery
turnaround costs incurred in 1998. These increases for other
Company operations were more than offset by reductions in
depreciation expense due to the sale or closure of 29 retail
units since the end of 2000 and the non-amortization of goodwill
in 2002 due to the adoption of SFAS No. 142.



| |                                                                            
| | ---------------------------------------------------------------------------
| | Selling, General and Administrative
    Expenses from Continuing Operations

For the year ended December 31, 2002,
SG&A expenses decreased approximately $3,314,000 or 12% to
$24,550,000 from $27,864,000 in the comparable 2001 period. The
decrease includes SG&A relating to the Yorktown refinery of
$718,000. SG&A expense decreases relating to the
Companys other operations were primarily due to lower
expense accruals for management incentive bonuses in 2002, the
revision of estimated accruals for 2001 management incentive
bonuses following the determination of bonuses to be paid to
employees, and expenses incurred in 2001 related to certain
related party transactions and certain environmental matters.
These decreases were offset in part by expenses recorded for the
settlement of certain claims, assessments, and legal matters,
including the matter set forth in Note 18 to the Companys
Consolidated Financial Statements included in Item 8, and
increased letter of credit fees.



| |                                                         
| | --------------------------------------------------------
| | Interest Expense (Income) from Continuing
    Operations

For the year ended December 31, 2002,
interest expense increased approximately $12,210,000 or 51% to
$36,308,000 from $24,098,000 in the comparable 2001 period.
Approximately $17,168,000 of the increase is due to the issuance
of new senior subordinated notes and borrowings under the
Companys new loan facilities entered into in connection
with the acquisition of the Yorktown refinery as more fully
described in Note 11 to the Companys Consolidated
Financial Statements included in Item 8. In addition,
because of the timing of the Yorktown refinery acquisition and
the 11% Notes financing, the Company was unable to provide the
45 day notice required by the Indenture supporting the
Companys 9 3/4% Notes for refinancing the notes prior
to the issuance of the 11% Notes. As a result, the Company paid
interest on the 9 3/4% Notes for 45 days after the
financing, which amounted to approximately $1,230,000. These
increases were offset in part by a decrease

27



---



##### 



in interest expense of approximately $6,159,000
relating to the repayment of the Companys $100,000,000 of
9 3/4% Senior Subordinated Notes due 2003 with a portion of
the proceeds of the Companys issuance of $200,000,000 of
11% Notes.


For the year ended December 31, 2002,
interest income decreased approximately $1,229,000 or 74% to
$432,000 from $1,661,000 in the comparable 2001 period. The
decrease was primarily due to a reduction in interest and
investment income from the investment of funds in short-term
instruments. This reduction was due in part to a reduction in
the amount of funds available for investment because of the
repurchase of 59 retail units from FFCA in July 2001 and the
acquisition of the Yorktown refinery. In addition, no interest
income was accrued in 2002 relating to the note from a related
party discussed in Note 7.



| |                                                                         
| | ------------------------------------------------------------------------
| | Amortization/Write-Off of Financing Costs
    from Continuing Operations

In connection with the acquisition of the
Yorktown refinery and the refinancing of the Companys
9 3/4% Notes, the Company incurred approximately
$17,436,000 of deferred financing costs relating to new senior
subordinated debt and new senior secured loan facilities. These
costs are being amortized over the term of the related debt.

The increase in the amortization/write-off of
financing costs for the year ended December 31, 2002 was
$2,492,000, primarily related to the amortization of the costs
described above. The increase also includes the write-off of
approximately $364,000 in deferred financing costs related to
the Companys 9 3/4% Notes that were refinanced.



| |                                            
| | -------------------------------------------
| | Income Taxes from Continuing
    Operations

The effective tax benefit rate for year ended
December 31, 2002 was approximately 40%. The Company
believes that the tax benefit created in 2002 will be fully
realizable. The effective tax rate for the year ended
December 31, 2001 was approximately 38%.



| |                        
| | -----------------------
| | Discontinued Operations

For the year 2002, the Company sold 11 retail
units and reclassified 9 others as assets held for sale. The
remaining assets and results of operations of these 20 retail
units are included in discontinued operations in the
Companys Consolidated Financial Statements included in
Item 8. For 2002 and 2001, discontinued operations included
revenues of $26,010,000 and $40,335,000, respectively, and
earnings before income taxes of $4,576,000 for 2002 and a loss
before income taxes of $643,000 for 2001. Earnings from
discontinued operations before income taxes of $4,576,000
includes a net gain on the disposal of the 11 retail units sold
of $6,464,000, which is net of $308,000 of goodwill write-offs;
and impairment write-downs of $448,000, including $22,000 of
goodwill write-offs, on four of the retail units held for sale.
See Note 5 to the Companys Consolidated Financial
Statements included in Item 8 for a further discussion of
discontinued operations.

Outlook

The Companys strategy is to profitably
operate its refining, retail marketing and Phoenix Fuel
operations. The immediate strategic focus is to:



| |   |                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | efficiently integrate the Yorktown refinery,
    which was purchased by the Company in 2002, into the
    Companys existing operations while maximizing the
    profitability of all the Companys refineries;
|
| |  | work with producers in the Four Corners area to
    augment crude oil supply;                                                                                                                                  
|
| |  | maximize the profitability of the Retail Group by
    increasing sales of high-margin merchandise and continuing to
    reduce costs;                                                                          
|
| |  | maximize the profitability of Phoenix Fuel by
    increasing wholesale fuel volumes, expanding its service
    offerings, and broadening its wholesale customer base;                                          

28



---



##### 





| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | increase cash flow by continuing to reduce
    operating expenses and eliminating non-essential capital
    expenditures;                  
|
| |  | rationalize the Companys asset base by
    selling non-strategic and underperforming assets and selectively
    pursuing acquisitions; and
|
| |  | continue the Companys debt reduction
    strategy implemented in 2002.                                                                    

The Companys Four Corners refining
operations continue to be affected by reduced crude oil
production in the area and could further be affected by ongoing
crude oil supply contract negotiations if such negotiations are
not successful in retaining volumes. Additionally, pipelines
bringing refined products into this area directly impact and may
continue to impact the Companys earnings. Further,
completion of new pipeline projects could also have an impact on
the Companys profitability.

The Companys refineries continue to run
well with no significant operational problems and have the
ability to respond to changing economic conditions in order to
maximize refinery netbacks.

The Yorktown refinery will undergo a crude unit
and coker unit turnaround commencing at the end of March 2003.
These units are expected to be down for approximately three
weeks. The refinery will be operating at a reduced production
rate during these activities. In anticipation of the turnaround,
the Company will maintain inventories sufficient to meet its
contractual requirements during the turnaround.

Refining margins in the fourth quarter of 2002
showed improvement over the previous three quarters and this
trend has continued into the first quarter of 2003 as refining
margins continue to show improvement. Tight crude oil and
finished product inventories, coupled with strong finished
product demand, have contributed to improved refining margins in
early 2003.

The Company is currently working on a longer-term
crude oil supply transaction that if successful will put a
new to the market crude oil into the Yorktown
refinery at very attractive pricing, with little to no detriment
to high-end product yields. This transaction may be completed as
early as the fall of 2003.

The Company will continue to evaluate and
potentially dispose of non-strategic and underperforming assets
in its retail operations. The Company continues to face
increased competition in the markets in which it operates from
major oil companies, independent oil companies, and
non-traditional gasoline marketers. The Company has been, and
expects to continue to be, competitive in these markets and to
realize acceptable margins with the exception of the Phoenix
market. The Phoenix market has been, and continues to be,
extremely competitive due to dealer pricing and the Company
continues to lose market share. The Company is actively
marketing its remaining retail assets in the Phoenix area.

The Companys Phoenix Fuel operations
continue to be affected by an economic downturn in its major
markets. This has resulted in reduced demand for finished
products and lubricants, as well as having an affect on finished
product margins. In the fourth quarter of 2002, volumes and
margins improved over the three previous quarters. The Company
expects this trend to continue into the first quarter of 2003,
but can provide no assurance that it will do so. In order to
maintain and improve its market position, Phoenix Fuel has
implemented a number of operational and marketing strategies and
is utilizing technological advances to attract and provide
better service and information to its customers.

The Companys future results of operations
are primarily dependent on producing or purchasing, and selling,
sufficient quantities of refined products at margins sufficient
to cover fixed and variable expenses.

Comparison of the Years Ended
December 31, 2001 and December 31, 2000



| |                                                            
| | -----------------------------------------------------------
| | Earnings from Continuing Operations Before
    Income Taxes

For the year ended December 31, 2001,
earnings before income taxes were $20,751,000, an increase of
$9,280,000 from earnings before income taxes of $11,471,000 for
the year ended December 31, 2000. The increase was
primarily due to a 27% increase in refinery margins, due in part
to a reduction in crude oil costs resulting from contract
negotiations with suppliers; lower operating expenses, including
depreciation and amortization; and a 4% increase in retail
merchandise sales with relatively flat margins year-to-year.
These

29



---



##### 



increases were offset in part by a 7% decline in
refinery sourced finished product sales volumes, due in part to
reduced crude oil production and competitive conditions in the
Four Corners area; a 10% decline in wholesale fuel volumes sold
by Phoenix Fuel to third party customers, due in part to a
slowdown in the commercial/industrial sector in Arizona and
increased volumes sold in the third quarter of 2000 related to
increased diesel demand because of disruptions of natural gas
supplies into Arizona; a 5% decrease in Phoenix Fuel finished
product margins; and an increase in selling, general and
administrative expenses (SG&A).


In addition, 2001 earnings before income taxes
were reduced by $6,132,000 as the result of losses on the
disposal/write-down of various refining and retail assets and by
$5,409,000 due to the recording of a reserve for a note and
interest receivable from the Former CEO, as discussed in Note 7
to the Companys Consolidated Financial Statements in
Item 8.



| |                                        
| | ---------------------------------------
| | Revenues from Continuing
    Operations

Revenues for the year ended December 31,
2001, decreased approximately $106,275,000 or 10% to
$951,344,000 from $1,057,619,000 in the comparable 2000 period.
The decrease was due to, among other things, a 10% decline in
wholesale fuel volumes sold by Phoenix Fuel to third party
customers, due in part to the factors stated above, along with a
6% decrease in related finished product selling prices; an 8%
decline in refinery average selling prices, along with a 7%
decrease in refinery sourced finished product sales volumes; and
a 4% decline in retail refined product selling prices. These
decreases were partially offset by a 4% increase in retail
merchandise sales.

The volumes of finished products sold through the
Companys retail units decreased approximately 10% from
2000 levels. The volume of finished product sold from service
station/ convenience stores that were in operation for a full
year in each period decreased approximately 2%. These declines
were primarily due to increased price competition in the
Companys Phoenix and Tucson markets. In addition, the
Company has closed or sold 39 service station/ convenience
stores and opened or acquired three since the beginning of 2000.
Volumes sold from the Companys travel center declined
approximately 6%, due in part to direct competition from a truck
stop/ casino that opened in 2001.



| |                                                     
| | ----------------------------------------------------
| | Cost of Products Sold from Continuing
    Operations

For the year ended December 31, 2001, cost
of products sold decreased $121,765,000 or 14% to $728,699,000
from $850,464,000 in the comparable 2000 period. The decrease
was due in part to a 15% decline in average crude oil costs; a
10% decline in wholesale fuel volumes sold by Phoenix Fuel to
third party customers, along with a 5% decrease in the cost of
finished products purchased; and a 7% decline in refinery
sourced finished product sales volumes. These decreases were
partially offset by a 4% increase in retail merchandise sales.
In addition, 2001 cost of products sold increased by
approximately $3,302,000 as a result of a reduction in the
carrying value of inventories related to declines in crude oil
and refined product prices.

For the year 2001, certain lower cost refinery
LIFO inventory layers were liquidated, which resulted in a
decrease in the cost of products sold of approximately $231,000.
For the year 2000, certain lower cost Phoenix Fuel LIFO
inventory layers were liquidated, which resulted in a decrease
in the cost of products sold of approximately $1,737,000.



| |                                                  
| | -------------------------------------------------
| | Operating Expenses from Continuing
    Operations

For the year ended December 31, 2001,
operating expenses decreased approximately $7,914,000 or 7% to
$107,431,000 from $115,345,000 in the comparable 2000 period.
The decrease was due to, among other things, reduced expenses
for payroll and related costs for retail operations, including
operating bonuses, along with a reduction in other operating
expense categories, due in part to the closure of 20 and sale of
19 service station/ convenience stores during 2000 and 2001;
lower lease expense due to the repurchase of 59 service station/
convenience stores from FFCA Capital Holding Corporation
(FFCA) in July 2001, which had been sold as part of
a sale-leaseback transaction between the Company and FFCA in
December 1998; decreased payroll and related costs and repair
and maintenance expenses for Phoenix Fuel; and lower chemical
and catalyst

30



---



##### 



costs and reduced purchase fuel costs for the
refineries. These decreased costs were offset in part by higher
refinery costs for materials, contract labor, and utilities.




| |                                                             
| | ------------------------------------------------------------
| | Depreciation and Amortization from
    Continuing Operations

For the year ended December 31, 2001,
depreciation and amortization increased approximately $118,000
to $31,857,000 from $31,739,000 in the comparable 2000 period.
The increase was primarily related to the repurchase of
59 service/ station convenience stores from FFCA in July
2001; newly acquired service station/ convenience stores; the
capitalization of the 2000 contingent payment related to the
acquisition of the Bloomfield refinery discussed in more detail
in Note 4 to the Companys Consolidated Financial
Statements in Item 8; and construction, remodeling and
upgrades in retail and refining operations during 2000 and 2001.
These increases were offset in part by decreases related to
lower refinery turnaround amortization costs in 2001 and the
sale or closure of 39 service station/ convenience stores.



| |                                                                            
| | ---------------------------------------------------------------------------
| | Selling, General and Administrative
    Expenses from Continuing Operations

For the year ended December 31, 2001,
SG&A increased approximately $2,491,000 or 10% to
$27,864,000 from $25,373,000 in the comparable 2000 period. The
increase was primarily due to increased expense accruals for
bonuses paid under the Companys management incentive bonus
plan; certain outside legal expenditures, including expenditures
related to transactions involving the Former CEO or related
entities; certain consulting expenditures; certain related party
transactions discussed in more detail in Note 7 to the
Companys Consolidated Financial Statements in Item 8;
and accruals for certain environmental costs. These increases
were offset in part by lower self-funded group health insurance
costs in 2001 due to improved claims experience, severance pay
costs incurred in the first quarter of 2000 relating to a
reorganization and staff reduction program, and expenditures
incurred in 2000 for certain strategic planning costs.



| |                                                                          
| | -------------------------------------------------------------------------
| | Loss on the Disposal/ Write-down of Assets
    from Continuing Operations

For the year ended December 31, 2001, the
Company recorded a pre-tax loss on the disposal/write-down of
assets of $6,132,000. This amount included losses of $609,000 on
the sale of assets in the ordinary course of business, primarily
related to the sale of eleven service station/convenience
stores; losses of $2,639,000 on the write-down of assets due to
impairment, resulting from the application of Statement of
Financial Accounting Standard (SFAS) No. 121
due to a strategy to sell certain service station/convenience
stores, some of which were closed; losses of $592,000 relating
to the value of leasehold improvements included in leased
service station/convenience stores returned to the lessors; and
losses of $2,292,000 primarily related to the retirement or
replacement of certain refinery property, plant, and equipment.
In addition, the Company recorded a reserve in the amount of
$5,409,000 for a note and interest receivable from the Former
CEO as discussed in Note 7 to the Companys
Consolidated Financial Statements in Item 8.



| |                                                         
| | --------------------------------------------------------
| | Interest Expense (Income) from Continuing
    Operations

For the year ended December 31, 2001,
interest expense decreased approximately $313,000 or 1% to
$24,098,000 from $24,411,000 in the comparable 2000 period. The
decrease was primarily due to interest expense in 2000 related
to borrowings under the Companys revolving credit facility.

For the year ended December 31, 2001,
interest and investment income decreased approximately $328,000
or 16% to $1,661,000 from $1,989,000 in the comparable 2000
period. The decrease was primarily due to a decline in the
amount of funds available for investment in short-term
instruments, as a result of the FFCA repurchase.



| |                                            
| | -------------------------------------------
| | Income Taxes from Continuing
    Operations

The effective tax rate for the year ended
December 31, 2001 was approximately 38% and for the year
ended December 31, 2000 was approximately 35%. The
difference in the rates was primarily the result of coal seam
gas tax and state pollution control credits utilized in 2000.

31



---



##### 





| |                        
| | -----------------------
| | Discontinued Operations

For the year 2001 and 2000, the assets and
results of operations of 20 retail units are included in
discontinued operations in the Companys Consolidated
Financial Statements included in Item 8. For 2001 and 2000,
discontinued operations included revenues of $40,335,000 and
$41,741,000, and losses before income taxes of $643,000 and
$134,000, respectively.

Liquidity and Capital Resources



| |                          
| | -------------------------
| | Cash Flow From Operations

Net cash provided by operating activities
decreased to $38,068,000 for the year ended December 31,
2002 from $65,256,000 for the year ended December, 2001. The
decrease was primarily a result of a decrease in net earnings
before depreciation and amortization, amortization/write-off of
financing costs, deferred income taxes, and net (gain) loss
on disposal/ write-down of assets in 2002, offset in part by an
increase in cash flows related to changes in operating assets
and liabilities in each period.



| |                
| | ---------------
| | Working Capital

Working capital at December 31, 2002
consisted of current assets of $211,919,000 and current
liabilities of $120,351,000, or a current ratio of 1.76:1. At
December 31, 2001, the current ratio was 1.71:1, with
current assets of $135,116,000 and current liabilities of
$78,837,000.

Current assets have increased since
December 31, 2001, primarily due to increases in accounts
receivable, inventories, prepaids and other, and current
deferred taxes. These increases were offset in part by a
decrease in cash and cash equivalents. Accounts receivable have
increased primarily due to trade receivables recorded in
connection with sales by the Yorktown refinery and an increase
in other trade receivables resulting from increased sales
volumes and higher finished product selling prices. Inventories
have increased primarily due to inventories on hand related to
the Yorktown refinery. For other Company operations, inventories
have increased due to increases in crude oil and refined product
prices and terminal inventory volumes. These increases were
offset in part by decreases in pipeline and refinery onsite
crude oil volumes, and decreases in refinery onsite, Phoenix
Fuel and retail refined product volumes. Prepaids and other have
increased primarily due to prepaid insurance premiums. The
increase in current deferred taxes relates primarily to the
Yorktown refinery acquisition.

Current liabilities have increased since
December 31, 2001, due to increases in current portion of
long-term debt, accounts payable and accrued expenses. The
current portion of long-term debt has increased due to the
additional long-term debt incurred in connection with the
acquisition of the Yorktown refinery. Accounts payable have
increased due to accounts payable recorded in connection with
the operations of the Yorktown refinery and for other Company
operations primarily as a result of higher raw material and
finished product costs, offset in part by a reduction in other
trade payables. Accrued expenses have increased primarily
because of the operations of the Yorktown refinery, and for
other Company operations, higher accrued interest balances
related in part to the additional debt incurred in connection
with the Yorktown refinery acquisition and accruals for 401(k)
Company matching and discretionary contributions, offset in part
by no management incentive bonus accruals in 2002.



| |                                       
| | --------------------------------------
| | Capital Expenditures and
    Resources

Net cash used in investing activities for capital
expenditures totaled approximately $12,990,000 for the year
ended December 31, 2002. Expenditures were primarily for
turnaround expenditures for the Ciniza and Bloomfield
refineries, financial accounting software upgrades, operational
and environmental projects for the refineries, and retail
operation upgrades.

The Company received proceeds of approximately
$19,517,000 from the sale of property, plant and equipment and
other assets in 2002, primarily from the sale of 13 service
station/convenience stores and certain vacant land. A net gain
of approximately $7,865,000 resulted from all of the property,
plant and equipment and other asset sales.

32



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##### 



On May 14, 2002, the Company acquired the
61,900 bpd Yorktown refinery from BP Corporation North
America Inc. and BP Products North America Inc. for $127,500,000
plus $65,182,000 for inventories, the assumption of certain
liabilities, and a conditional earn-out, the maximum amount of
which cannot exceed $25,000,000. The Company also incurred
transaction costs of approximately $2,000,000 in connection with
the acquisition. See Note 4 to the Companys
Consolidated Financial Statements in Item 8 for a more
detailed discussion of this transaction.

Approximately $17,436,000 of financing fees were
paid to various financial institutions in connection with
financing arrangements for the Companys acquisition of the
Yorktown refinery and the refinancing of the Companys
9 3/4% Notes.

Following the acquisition of the Yorktown
refinery, the Company developed a debt reduction strategy with
the goal of reducing indebtedness by $50,000,000 prior to
year-end 2002. The goal was to be accomplished by managing
inventory to a lower level, reducing non-essential capital
expenditures and selling non-core and/or underperforming assets.
For the year, the Company received proceeds from the sale of
assets of approximately $19,517,000. By year-end, the Company
had reduced the outstanding balance of its term loan by
approximately $7,778,000 and reduced the outstanding balance of
its revolving credit facility by $35,000,000. Although the
Company did not reach its goal in 2002, the Company intends to
use the proceeds of additional asset sales in 2003 to reduce
outstanding debt.

The Company is actively marketing a number of its
service station/convenience stores, including its remaining
units in Phoenix and Tucson. Of the units being marketed, three
were sold in the first quarter of 2003.

The Company is in the process of negotiating a
purchase and sale agreement for an approximate 8-acre tract of
land in north Scottsdale that includes its corporate
headquarters building. The Company also is negotiating a lease
agreement with the potential buyer to lease back a portion of
the corporate headquarters building. No agreement has been
reached with the potential buyer at this time, and as such, the
Company does not know if or when this transaction will close.

The Company also is evaluating the possible sale
of other non-strategic or underperforming assets in addition to
the assets described above. The Company can provide no
assurance, however, that it will be able to complete the sales
of the assets described above or other asset sales.

The Company currently intends to use the proceeds
from these potential sales, and savings or proceeds generated
from other parts of the Companys debt reduction
initiative, to reduce long-term debt. As described in
Note 11, the Companys loan facilities require the
Company to reduce the outstanding principal balance of its
revolving credit facility by $15,000,000 from the proceeds of
asset sales occurring between October 1, 2002 and
June 30, 2003. Proceeds of approximately $7,000,000 were
used to reduce the revolving credit facility as of
February 28, 2003.

The Company has two capital projects relating to
its Four Corners refinery operations, in which approximately
$3,000,000 of spending has occurred. The projects are currently
dormant, although they remain viable. During 2003, the Company
will be evaluating the future status of these projects.

The Company has budgeted approximately
$25,900,000 for capital expenditures in 2003 excluding any
potential acquisitions. Of this amount, approximately $1,500,000
is for the completion of projects that were started in 2002. In
addition, approximately $19,300,000 is budgeted for
non-discretionary projects that are required by law or
regulation or to maintain the physical integrity of existing
assets. These expenditures are primarily for operational and
environmental projects at the Companys existing
refineries, including approximately $7,000,000 for a crude unit
and coker unit turnaround at the Yorktown refinery, and
replacements and upgrades for the retail operations. Another
$2,000,000 is budgeted for discretionary projects to sustain or
enhance the current level of operations, increase earnings
associated with existing or new business and to expand existing
operations. The remaining budget of $3,100,000 is for
discretionary growth projects, including $2,000,000 for capital
expenditure contingencies.

33



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##### 



In future years, the Company will be making
substantial capital expenditures for certain government mandated
environmental projects, including low sulfur fuel requirements.
See discussions under the caption Regulatory, Environmental and
Other Matters included in Items 1 and 2 for more details of
these projects.

The Company expects that maintenance capital
expenditures will be approximately $5,500,000 and $3,300,000
annually over each of the next three years for its Four Corners
refining operations and its Retail Group/ Phoenix Fuel
operations, respectively, exclusive of any growth projects,
acquisitions, and acquisition related capital expenditures.

The Company expects that maintenance capital
expenditures for its Yorktown refinery will be approximately
$7,800,000 annually over each of the next three years, exclusive
of any growth projects, acquisitions, and acquisition related
capital expenditures.

As described in Note 11 to the
Companys Consolidated Financial Statements included in
Item 8, the Companys loan facilities limit the
Companys capital expenditures on a quarterly basis through
the fourth quarter of 2003. Capital expenditures are limited to
$44,000,000 in 2003. The limitations permit all capital
expenditures currently anticipated for 2003. Prior approval from
the Companys lenders would be required to exceed the
agreed upon levels and the Company cannot provide assurance that
it could obtain such approval. See the discussion below in
Capital Structure for further information relating
to the Companys debt covenants.

The Company continues to investigate other
capital improvements to its existing facilities. The amount of
capital projects that are actually undertaken in 2003 will
depend on, among other things, general business conditions,
results of operations, financial constraints resulting from the
Yorktown refinery acquisition, and the limitations described in
the above paragraph.

Much of the capital currently budgeted for
environmental compliance is integrally related to operations or
to operationally required projects. The Company does not
specifically identify capital expenditures related to such
projects on the basis of whether they are for environmental as
opposed to economic purposes. With respect to capital
expenditures budgeted primarily to satisfy environmental
regulations, the Company estimates that approximately $565,000,
$1,900,000 and $1,100,000 were spent in 2002, 2001 and 2000,
respectively, and that approximately $3,787,000 will be spent in
2003. With respect to the Companys operating expenses for
environmental compliance, while records are not kept
specifically identifying or allocating such expenditures,
management believes that the Company incurs significant
operating expense for such purposes.

Changes in the tax laws, changes in federal and
state clean air and clean fuel requirements and other changes in
environmental laws and regulations also may increase future
capital and operating expenditure levels.

The Company anticipates that working capital,
including that necessary for capital expenditures and debt
service, will be funded through existing cash balances, cash
generated from operating activities, and, if necessary, future
borrowings. Future liquidity, both short and long-term, will
continue to be primarily dependent on producing or purchasing,
and selling, sufficient quantities of refined products at
margins sufficient to cover fixed and variable expenses. The
Company believes that it will have sufficient working capital to
meet its needs over the next 12-month period.

The Company purchases crude oil and other
feedstocks from a number of suppliers to operate its Four
Corners and Yorktown refineries. The Company acquires the
feedstocks for its Yorktown refinery from a number of domestic
and international suppliers. The Company has not historically
participated in these markets, and as such, has not had a credit
relationship with these suppliers. Due to the weak economy and
the poor profitability experienced by refiners and marketers,
including the Company, throughout 2002, several suppliers to the
Yorktown refinery have required the Company to provide letters
of credit for either a portion or the full amount of the
purchases.

At December 31, 2002 and February 28,
2003, the Company had approximately $41,193,000 and $42,668,000,
respectively, of letters of credit outstanding. The Company
recently increased the availability of

34



---



##### 



letters of credit under its credit facility from
$25,000,000 to $50,000,000. The inability of the Company to post
satisfactory letters of credit could constrain the
Companys ability to purchase feedstocks on the most
beneficial terms.


The Companys cash flow from operations
depends primarily on producing and selling quantities of refined
products at refinery margins sufficient to cover fixed and
variable expenses. In recent years, crude oil costs and prices
of refined products have fluctuated substantially. These costs
and prices depend on numerous factors beyond the Companys
control, including, among other things:



| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the supply of and demand for crude oil, gasoline
    and other refined products;                                                                
|
| |  | changes in the economy;                                                                                                                         
|
| |  | changes in the level of foreign and domestic
    production of crude oil and refined products;                                                  
|
| |  | worldwide political conditions;                                                                                                                 
|
| |  | the marketing of alternative and competing fuels;                                                                                               
|
| |  | the extent of government regulations; and                                                                                                       
|
| |  | local factors, including market conditions,
    pipeline capacity, and the level of operations of other
    refineries in the Companys markets.

The Companys crude oil requirements are
supplied from sources that include major oil companies, large
independent producers, and smaller local producers. In general,
crude oil supply contracts are relatively short-term contracts
with market-responsive pricing provisions. An increase in crude
oil prices would adversely affect the Companys operating
margins if the Company cannot pass along the increased cost of
raw materials to customers.

The Companys sale prices for refined
products are influenced by the commodity price of crude oil.
Generally, an increase or decrease in the price of crude oil
results in a corresponding increase or decrease in the price of
gasoline and other refined products. The timing of the relative
movement of the prices, however, as well as the overall change
in product prices, could reduce profit margins and could have a
significant impact on the Companys refining and marketing
operations, earnings, and cash flows. In addition, the Company
maintains inventories of crude oil, intermediate products, and
refined products, the values of which are subject to rapid
fluctuation in market prices. The Company purchases its refinery
feedstocks prior to selling the refined products manufactured
from them. Price level changes during the period between
purchasing feedstocks and selling the manufactured refined
products could have a significant effect on the Companys
operating results. Any long-term adverse relationships between
costs and prices could impact the Companys ability to
generate sufficient operating cash flows to meet its working
capital needs. Furthermore, because of the significantly greater
volume of products produced and sold by the Yorktown refinery,
as compared to the Companys other operations, the Company
has a much larger exposure to volatile refining margins than it
had in the past.

Moreover, the industry is highly competitive.
Many of the Companys competitors are large, integrated oil
companies which, because of their more diverse operations,
larger refineries, stronger capitalization and better brand name
recognition, may be better able than the Company is to withstand
volatile industry conditions, including shortages or excesses of
crude oil or refined products or intense price competition at
the wholesale and retail levels. Because some of the
Companys competitors refineries are larger and more
efficient than the Companys refineries, these refineries
may have lower per barrel crude oil refinery processing costs.

In addition, the Companys ability to borrow
funds under its current revolving credit facility could be
adversely impacted by low product prices that could reduce the
borrowing base tied to eligible accounts receivable and
inventories. The Companys debt instruments also contain
certain restrictive covenants that limit the Companys
ability to borrow funds if certain thresholds are not
maintained. At present, the Company can only borrow additional
amounts under its revolving credit facility as a result of the
limitation on additional indebtedness contained in the
indentures supporting the Companys notes. See the
discussion below in Capital Structure for further
information relating to these loan covenants.

35



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##### 



The Company presently has senior subordinated
ratings of B3 from Moodys Investor Services
and B from Standard & Poors.



| |                  
| | -----------------
| | Capital Structure

At December 31, 2002 and December 31,
2001, the Companys long-term debt was 75.8% and 65.3% of
total capital, respectively, and the Companys net debt
(long-term debt less cash and cash equivalents) to total
capitalization percentages were 75.3% and 62.8%, respectively.
The increase in each percentage is primarily related to the
increased debt incurred in connection with the acquisition of
the Yorktown refinery.

At December 31, 2002 the Company had
long-term debt of $398,069,000, net of current portion of
$10,251,000, including, $150,000,000 of 9% Senior Subordinated
Notes due 2007 (the 9% Notes) and $200,000,000 of
11% Senior Subordinated Notes due 2012 (the 11%
Notes). See Note 11 to the Companys Consolidated
Financial Statements included in Item 8 for a description
of these obligations.

Repayment of the Notes is jointly and severally
guaranteed on an unconditional basis by the Companys
direct and indirect wholly-owned subsidiaries, subject to a
limitation designed to ensure that such guarantees do not
constitute a fraudulent conveyance. Except as otherwise
specified in the indentures pursuant to which the Notes were
issued, there are no restrictions on the ability of such
subsidiaries to transfer funds to the Company in the form of
cash dividends, loans or advances. General provisions of
applicable state law, however, may limit the ability of any
subsidiary to pay dividends or make distributions to the Company
in certain circumstances.

Separate financial statements of the
Companys subsidiaries are not included herein because the
aggregate assets, liabilities, earnings, and equity of the
subsidiaries are substantially equivalent to the assets,
liabilities, earnings, and equity of the Company on a
consolidated basis; the subsidiaries are jointly and severally
liable for the repayment of the Notes; and the separate
financial statements and other disclosures concerning the
subsidiaries are not deemed by the Company to be material to
investors.

As described in more detail in Note 11 to
the Companys Consolidated Financial Statements included in
Item 8, the indentures supporting the Companys notes
and the Companys credit facility and loan facility contain
certain restrictive covenants, and other terms and conditions
that if not maintained, if violated, or if certain conditions
are met, could result in default, early redemption of the notes,
and affect the Companys ability to borrow funds, make
certain payments, or engage in certain activities. Covenants
associated with the 9% Notes and the 11% Notes currently
restrict the Companys ability to incur additional
indebtedness, other than under its credit facility, pay
dividends, and purchase the Companys common stock. A
default under any of the notes, the credit facility or the loan
facility could cause such debt, and by reason of cross-default
provisions, the Companys other debt to become immediately
due and payable. If the Company is unable to repay such amounts,
the lenders under the Companys credit facility and loan
facility could proceed against the collateral granted to them to
secure that debt. If those lenders accelerate the payment of the
credit facility and loan facility, the Company cannot provide
assurance that its assets would be sufficient to pay that debt
and other debt or that it would be able to refinance such debt
or borrow more money on terms acceptable to it, if at all. The
Companys ability to comply with the covenants, and other
terms and conditions, of the indentures, the credit facility and
the loan facility may be affected by many events beyond the
Companys control, and the Company cannot provide assurance
that its operating results will be sufficient to comply with the
covenants, terms and conditions.

The Companys high degree of leverage and
these covenants may, among other things:



| |   |                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | limit the Companys ability to use cash
    flow, or obtain additional financing, for future working
    capital, capital expenditures, acquisitions or other general
    corporate purposes;
|
| |  | continue to restrict the Companys ability
    to pay dividends if it so desired;                                                                                                            
|
| |  | require a substantial portion of cash flow from
    operations to make debt service payments;                                                                                                
|
| |  | limit the Companys flexibility to plan for,
    or react to, changes in business and industry conditions;                                                                                   

36



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##### 





| |   |                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | place the Company at a competitive disadvantage
    compared to less leveraged competitors; and                                                                                                                                           
|
| |  | increase the Companys vulnerability to the
    impact of adverse economic and industry conditions and, to the
    extent of the Companys outstanding debt under senior
    credit facilities, the impact of increases in interest rates.

If the Company is not able to generate sufficient
cash flow from operations or to borrow sufficient funds to
service its debt, or meet its working capital and capital
expenditure requirements, due to borrowing base restrictions,
increased letter of credit requirements, or otherwise, it may be
required to sell assets, reduce capital expenditures, refinance
all or a portion of its existing debt, or obtain additional
financing. The Company cannot provide assurance that it will be
able to refinance its debt, sell assets or borrow more money on
terms acceptable to it, if at all.

In addition, the acquisition of the Yorktown
refinery could constrain the Companys ability to borrow
funds, make payments, or engage in other contemplated activities
under the terms of the indentures supporting its notes, the
credit facility, or the loan facility, particularly in the first
three years of operations. As described in more detail in
Note 11 to the Companys Consolidated Financial
Statements included in Item 8, the Company had loan
covenant issues in the quarter ending September 30, 2002.
Amendments to the credit facility and the loan facility
addressed these issues. The Company expects to be in compliance
with the amended covenants going forward, and does not believe
that any presently contemplated activities will be constrained.
A prolonged period of low refining margins, however, would have
a negative impact on the Companys ability to borrow funds
and to make expenditures for certain purposes and would have an
impact on compliance with the Companys loan covenants.

Included in the tables below are a list of the
Companys obligations and commitments to make future
payments under contracts and under contingent commitments.

|                                   |  |                |         |               |  |      |        |      |  |      |        |      |  |       |        |  |  |   |       |  |  |   |         |  |  |   |         | 
|---------------------------------- |  | -------------- | ------- | ------------- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ----- | ------ |  |  | - | ----- |  |  | - | ------- |  |  | - | ------- | 
|                                   |  |               
|                                   |  | Payments Due  
|                                   |  |               
|                                   |  |                |         | All Remaining
|Contractual Obligations            |  | Total          |         | 2003          |  | 2004 |        | 2005 |  | 2006 |        | 2007 |  | Years
|                                   |  |                |         |               |  |      |        |      |  |      |        |      |  |      
|                                   |  |               
|                                   |  | (In thousands)
|Long-Term Debt*                    |  | $              | 407,268 |               |  | $    | 10,251 |      |  | $    | 11,128 |      |  | $     | 35,889 |  |  | $ |      |  |  | $ | 150,000 |  |  | $ | 200,000 | 
|Capital Lease Obligations          |  |                | 6,703   |               |  |      |       |      |  |      |       |      |  |       |       |  |  |   |      |  |  |   | 6,703   |  |  |   |        | 
|Operating Leases                   |  |                | 17,238  |               |  |      | 4,391  |      |  |      | 2,744  |      |  |       | 1,964  |  |  |   | 1,598 |  |  |   | 939     |  |  |   | 5,602   | 
|                                   |  |                |         |               |  |      |        |      |  |      |        |      |  |       |        |  |  |   |       |  |  |   |         |  |  |   |         | 
|Total Contractual Cash Obligations |  | $              | 431,209 |               |  | $    | 14,642 |      |  | $    | 13,872 |      |  | $     | 37,853 |  |  | $ | 1,598 |  |  | $ | 157,642 |  |  | $ | 205,602 | 
|                                   |  |                |         |               |  |      |        |      |  |      |        |      |  |       |        |  |  |   |       |  |  |   |         |  |  |   |         | 



---



|  |                                   
|- | ----------------------------------
|* | Excluding original issue discount.

|                                                           |  |                                 |         |               |  |      |        |      |  |      |   |      |  |       |         |  |  |   |   |  |  |   |   |  |  |   |   | 
|---------------------------------------------------------- |  | ------------------------------- | ------- | ------------- |  | ---- | ------ | ---- |  | ---- | - | ---- |  | ----- | ------- |  |  | - | - |  |  | - | - |  |  | - | - | 
|                                                           |  |                                
|                                                           |  | Amount of Commitment Expiration
|                                                           |  |                                
|                                                           |  |                                 |         | All Remaining
|Other Commercial Commitments                               |  | Total                           |         | 2003          |  | 2004 |        | 2005 |  | 2006 |   | 2007 |  | Years
|                                                           |  |                                 |         |               |  |      |        |      |  |      |   |      |  |      
|                                                           |  |                                
|                                                           |  | (In thousands)                 
|Lines of Credit* (including Standby Letters of
    Credit) |  | $                               | 100,000 |               |  | $    |       |      |  | $    |  |      |  | $     | 100,000 |  |  | $ |  |  |  | $ |  |  |  | $ |  | 
|Standby Letters of Credit                                  |  |                                 | 41,193  |               |  |      | 41,193 |      |  |      |  |      |  |       |        |  |  |   |  |  |  |   |  |  |  |   |  | 



---



|  |                                                                                                                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Standby letters of credit reduce the availability
    of funds for direct borrowings under the line of credit. At
    December 31, 2002 there was $25,000,000 of direct
    borrowings under the line of credit.

The Company is committed under a long-term
purchase contract that expires in August 2005 to purchase a
minimum of 3,500 barrels per day of natural gasoline at
market price plus an additional amount per gallon.

The Companys Board previously authorized
the repurchase of up to 2,900,000 shares of the
Companys common stock, to be made from time to time as
conditions permit. Shares could be repurchased through privately
negotiated transactions, block share purchases and open market
transactions. The share repurchase program was discontinued in
2002 and no shares were repurchased in 2002. Since the inception
of the stock repurchase program, the Company repurchased
2,582,566 shares for approximately $25,716,000, resulting in a

37



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##### 



weighted average cost of $9.96 per share. The
repurchased shares are treated as treasury shares and are
available for a number of corporate purposes including, among
other things, for options, bonuses, and other employee stock
benefit plans.


The Board suspended the payment of cash dividends
on common stock in the fourth quarter of 1998. At the present
time, the Company is unable to pay dividends under the terms of
its indentures and has no plans to reinstate such dividends even
if it could. The payment of future dividends is subject to the
results of the Companys operations, declaration by the
Companys Board of Directors, and compliance with certain
debt covenants.



| |                           
| | --------------------------
| | Related Party Transactions

In the past, the Company engaged in a number of
transactions with related parties, primarily James E.
Acridge, the Companys former Chairman, President and Chief
Executive Officer (the Former CEO). Certain of these
transactions are summarized in the table below.

|                                                                |  |                                     |           |      |  |      |           |   |  |   |           | 
|--------------------------------------------------------------- |  | ----------------------------------- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | 
|                                                                |  |                                    
|                                                                |  | Material Related Party Transactions
|                                                                |  |                                    
|Transaction                                                     |  | 2002                                |           | 2001 |  | 2000
|                                                                |  |                                     |           |      |  |     
|Purchase of Jomax Real Property                                 |  |                                     | N/A       |      |  | $    | 5,000,000 |   |  |   | N/A       | 
|Purchase of Jomax Rights                                        |  |                                     | N/A       |      |  | $    | 600,000   |   |  |   | N/A       | 
|Purchase of Artwork for Corporate Headquarters                  |  |                                     | N/A       |      |  | $    | 162,550   |   |  | $ | 450,000   | 
|Purchase of Stock                                               |  |                                     | N/A       |      |  | $    | 3,520,000 |   |  | $ | 896,887   | 
|Principal Amount of Loan Receivable at the end of
    each year |  | $                                   | 5,000,000 |      |  | $    | 5,000,000 |   |  | $ | 5,000,000 | 
|Interest Income on Loan                                         |  | $                                   | 0         |      |  | $    | 537,499   |   |  | $ | 538,954   | 
|Interest Receivable at 12/31.                                   |  | $                                   | 402,226   |      |  | $    | 394,384   |   |  | $ | 809,893   | 
|Other Receivables at 12/31.                                     |  | $                                   | 90,826    |      |  | $    | 88,338    |   |  | $ | 119,573   | 
|Other Amounts Classified as Compensation                        |  |                                     | N/A       |      |  | $    | 696,204   |   |  |   | N/A       | 
|Other (Receipts) Payments                                       |  |                                     | N/A       |      |  | $    | (39,440   | ) |  | $ | 23,153    | 

For a discussion or the matters included in the
above table, see Note 7 to the Companys Consolidated
Financial Statements included in Item 8.

Excluded from the above table are a number of
immaterial transactions involving the Company and the Former CEO
or entities controlled, or previously controlled, by the Former
CEO, including: (i) amounts paid to the Company for
purchases of fuel; (ii) payments made to entities
controlled, or previously controlled, by the Former CEO for
events held at facilities owned by such entities;
(iii) reimbursements for certain landscaping and
maintenance services provided for the Former CEO and entities
controlled, or previously controlled, by the Former CEO; and
(iv) the value of products and services provided to the
Company by the Former CEO or entities controlled, or previously
controlled, by him. Various immaterial amounts involving other
related parties are also excluded from the table. Additionally,
in 2002, the Company extended the period of time that the Former
CEO had to exercise 55,800 stock option grants for one year.
These stock options were due to expire on June 27, 2002 due
to the Former CEOs termination on March 29, 2002.
Because the extension changed the terms of the original stock
option grant under the Companys 1998 Stock Incentive Plan,
the Company was required to record compensation expense in the
amount of $79,500.

All of the material foregoing transactions were
reviewed and approved by the Board or committees of the Board.

As previously discussed, the Former CEO, and
three entities controlled by the Former CEO have commenced
Chapter 11 bankruptcy proceedings. The Company is pursuing
claims in the bankruptcy proceedings for, among other things,
the following: (i) the loan and related accrued interest
discussed above; (ii) the other receivables outstanding as
of December 31, 2002 discussed above;
(iii) approximately $515,445 of costs incurred through
December 31, 2002 in connection with resolving a lease
dispute and related litigation in which an entity controlled by
the Former CEO is a sublessee of the Company and a limited
liability

38



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##### 



company in which the bankruptcy estate of an
entity controlled by Mr. Acridge owns a 51% interest is the
Landlord (costs incurred subsequent to December 31, 2002
also will be pursued); (iv) approximately $124,000 for the
time spent by an employee of the Company on projects for
entities controlled, or previously controlled, by the Former
CEO; (v) approximately $89,000 for landscaping services
provided by employees of the Company that benefited the Former
CEO; (vi) approximately $15,600 for what the Company
believes are non-Company expenses incurred by the Former CEO on
a Company credit card; and (vii) approximately $1,400 of
other miscellaneous amounts. It is unknown whether, and to what
extent, creditors, including the Company, will receive any
recovery on their respective debts from any of the four
bankruptcy estates.




| |                
| | ---------------
| | Risk Management

The Company is exposed to various market risks,
including changes in certain commodity prices and interest
rates. To manage the volatility relating to these normal
business exposures, the Company, from time to time, uses
commodity futures and options contracts to reduce price
volatility, to fix margins in its refining and marketing
operations and to protect against price declines associated with
its crude oil and finished products inventories. The
Companys policies for trading activities and the use of
derivative financial instruments set limits on quantities,
requires various levels of approval and requires certain review
and reporting procedures.

In the second and third quarters of 2002, the
Company entered into various crude oil futures contracts in
order to economically hedge crude oil inventories and crude oil
purchases for the Yorktown refinery operations. For the year
ended December 31, 2002, the Company recognized losses on
these contracts of approximately $1,637,000 in cost of products
sold. These transactions did not qualify for hedge accounting in
accordance with SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended,
and accordingly were marked to market each month. At
December 31, 2002, the Company had no open crude oil
futures contracts or other commodity derivatives.

The Companys credit facility is
floating-rate debt tied to various short-term indices. As a
result, the Companys annual interest costs associated with
this debt may fluctuate. At December 31, 2002, there were
$25,000,000 of direct borrowings outstanding under this
facility. The potential increase in annual interest expense from
a hypothetical 10% adverse change in interest rates on these
borrowings at December 31, 2002, would be approximately
$148,000.

The Companys loan facility is floating-rate
debt tied to various short-term indices. As a result, the
Companys annual interest costs associated with this debt
may fluctuate. At December 31, 2002, there was $32,222,000
outstanding under this facility. The potential increase in
annual interest expense from a hypothetical 10% adverse change
in interest rates on these borrowings at December 31, 2002,
would be approximately $223,000.

The Companys operations are subject to
normal hazards of operations, including fire, explosion and
weather-related perils. The Company maintains various insurance
coverages, including business interruption insurance, subject to
certain deductibles. The Company is not fully insured against
certain risks because such risks are not fully insurable,
coverage is unavailable or premium costs, in the judgment of the
Company, do not justify such expenditures.

Credit risk with respect to customer receivables
is concentrated in the geographic areas in which the Company
operates and relates primarily to customers in the oil and gas
industry. To minimize this risk, the Company performs ongoing
credit evaluations of its customers financial position and
requires collateral, such as letters of credit, in certain
circumstances.



| |      
| | -----
| | Other

Federal, state and local laws and regulations
relating to the environment, health, and safety affect nearly
all of the operations of the Company. As is the case with other
companies engaged in similar industries, the Company faces
significant exposure from actual or potential claims and
lawsuits brought by either governmental authorities or private
parties, alleging non-compliance with environmental, health, and
safety laws or

39



---



##### 



regulations, or property damage or personal
injury caused by the environmental, health, or safety impacts of
current or historic operations. These matters include soil and
water contamination, air pollution and personal injuries or
property damage allegedly caused by substances manufactured,
handled, used, released or disposed of by the Company or by its
predecessors.


Applicable laws and regulations govern the
investigation and remediation of contamination at the
Companys current and former properties, as well as at
third-party sites to which the Company sent wastes for disposal.
The Company may be held liable for contamination existing at
current or former properties, notwithstanding that a prior
operator of the site, or other third party, caused the
contamination. The Company may also be held responsible for
costs associated with contamination cleanup at third-party
disposal sites, notwithstanding that the original disposal
activities were in accordance with all applicable regulatory
requirements at such time. The Company is currently engaged in a
number of such remediation projects.

Future expenditures related to compliance with
environmental, health, and safety laws and regulations, the
investigation and remediation of contamination, and the defense
or settlement of governmental or private property claims and
lawsuits cannot be reasonably quantified in many circumstances
for various reasons. These reasons include the speculative
nature of remediation and cleanup cost estimates and methods,
imprecise and conflicting data regarding the hazardous nature of
various types of substances, the number of other potentially
responsible parties involved, various defenses that may be
available to the Company and changing environmental, health, and
safety laws, regulations and their respective interpretations.
The Company cannot provide assurance that compliance with such
laws or regulations, such investigations or cleanups, or such
enforcement proceedings or private-party claims will not have a
material adverse effect on the Companys business,
financial condition or results of operation. For a further
discussion of environmental, health, and safety matters
affecting the Companys operations, see the discussion of
such matters contained in Items 1 and 2 under the heading
Regulatory, Environmental and Other Matters.

Rules and regulations implementing federal, state
and local laws relating to the environment, health, and safety
will continue to affect the operations of the Company. The
Company cannot predict what new environmental, health, or safety
legislation or regulations will be enacted or become effective
in the future or how existing or future laws or regulations will
be administered or enforced with respect to products or
activities to which they have not been previously applied.
Compliance with more stringent laws or regulations, as well as
more vigorous enforcement policies of the regulatory agencies,
could have an adverse effect on the financial position and the
results of operations of the Company and could require
substantial expenditures by the Company for, among other things:
(i) the installation and operation of refinery equipment,
pollution control systems and other equipment not currently
possessed by the Company; (ii) the acquisition or
modification of permits applicable to Company activities; and
(iii) the initiation or modification of cleanup activities.

As of December 31, 2002 and 2001, the
Company had environmental liability accruals of approximately
$8,367,000 and $2,484,000, respectively, which are summarized in
the table below. Environmental accruals are recorded in the
current and long-term sections of the Companys
Consolidated Balance Sheets. Note 18 to the Companys
Consolidated Financial Statements in Item 8 contains a more
detailed discussion of certain of these projects.

40



---



##### 



Summary of Environmental
Contingencies

|                                      |        |                |     |            |  |          |       |          |  |   |      |        |   |   |       |       | 
|------------------------------------- | ------ | -------------- | --- | ---------- |  | -------- | ----- | -------- |  | - | ---- | ------ | - | - | ----- | ----- | 
|                                      |        | As of          |     | Increase   |  |          |       | As of   
|                                      |        | 12/31/01       |     | (Decrease) |  | Payments |       | 12/31/02
|                                      |        |                |     |            |  |          |       |         
|                                      |        |               
|                                      |        | (In thousands)
|Farmington Refinery                   |        | $              | 570 |            |  | $        |      |          |  | $ |     |        |   | $ | 570   |      
|Ciniza  Land Treatment Facility      |        |                | 208 |            |  |          |      |          |  |   | (19  | )      |   |   | 189   |      
|Bloomfield Tank Farm (Old Terminal)   |        |                | 149 |            |  |          | (48   | )        |  |   | (12  | )      |   |   | 89    |      
|Ciniza  Solid Waste Management Units |        |                | 286 |            |  |          |      |          |  |   | (11  | )      |   |   | 275   |      
|Bloomfield Refinery                   |        |                | 977 |            |  |          | (412  | )        |  |   | (255 | )      |   |   | 310   |      
|Ciniza Well Closures                  |        |                | 100 |            |  |          |      |          |  |   |     |        |   |   | 100   |      
|Retail Service Stations  Various     |        |                | 194 |            |  |          |      |          |  |   | (75  | )      |   |   | 119   |      
|Yorktown Refinery                     |        |                |    |            |  |          | 7,500 |          |  |   | (785 | )      |   |   | 6,715 |      
|                                      |        |                |     |            |  |          |       |          |  |   |      |        |   |   |       |      
|                                      | Totals |                | $   | 2,484      |  |          | $     | 7,040    |  |   | $    | (1,157 | ) |   | $     | 8,367 | 
|                                      |        |                |     |            |  |          |       |          |  |   |      |        |   |   |       |      

The Company has a retirement plan, the Giant
Yorktown Cash Balance Plan (the Cash Plan), and a
retiree medical plan, the Giant Yorktown Retiree Medical Plan
(the Medical Plan), for the employees of Giant
Yorktown, Inc. These plans contain many of the same features of
plans that were in place for the employees of BP. As part of the
acquisition, the Company recorded a liability for future
payments under these plans of approximately $7,262,000 for the
Cash Plan and $2,141,000 for the Medical Plan.

The Cash Plan is a defined benefit plan. The Cash
Plan is a cash balance retirement plan fully funded
by the Company without employee contributions. All employees of
Giant Yorktown, Inc. meeting the eligibility requirements are
automatically included in the Cash Plan. Yorktown employees who
were covered by the BP retirement plan on July 1, 2000, are
eligible for a grandfather provision that affects the
calculation of the benefit under the plan. Employees who
complete at least five years of vesting service, are at least
65 years old, die while employed by Giant Yorktown, Inc.,
or leave employment due to certain Company actions are
completely vested and eligible to receive the full value of
their vested plan benefit. The vested benefit will be paid at
the employees discretion when the employee leaves the
Company, regardless of age or service.

The Company must make a lump-sum payment to the
Cash Plan each year. The amount of the Companys annual
payment is based on various factors, including actuarial
calculations linked to the potential retirement ages of Yorktown
employees. The Companys payment to the Cash Plan for the
year ending December 31, 2002 will be $868,000 and will be
made by August 2003. For the year ending December 31, 2003,
the Company estimates that the annual payment for the Cash Plan
will be approximately $1,500,000.

The Medical Plan is a defined post-retirement
benefit plan. The Medical Plan will pay a percentage of the
medical premium for coverage under the plan. Coverage is
available to full-time employees who are age 50 or older
with 10 or more years of service. The Company will pay from 50%
to 80% of the premium cost, depending on age and years of
service. Unlike the Cash Plan, the Company is not required to
fund the Medical Plan on an annual basis. The Company did not
make a payment to the Medical Plan for the year ending
December 31, 2002 and does not anticipate making a payment
to the Medical Plan for the year ending December 31, 2003.

The Companys Ciniza and Bloomfield
refineries primarily process a mixture of high gravity, low
sulfur crude oil, condensate and NGLs. The locally produced,
high quality crude oil known as Four Corners Sweet is the
primary feedstock for these refineries. The Companys
current projections of Four Corners crude oil production
indicate that the Companys crude oil demand will exceed
the crude oil supply that is available from local sources for
the foreseeable future. The Company expects to operate the
Ciniza and Bloomfield refineries at lower levels than otherwise
would be scheduled as a result of shortfalls in Four Corners
crude oil production. For a further discussion of raw material
supply for the Companys refineries, see the discussion
contained in Items 1 and 2 under the heading Raw Material
Supply.

41



---



##### 



The Company is aware of a number of actions,
proposals or industry discussions regarding product pipeline
projects that could impact portions of its marketing areas. The
completion of some or all of these projects would result in
increased competition by increasing the amount of refined
products potentially available in these markets, as well as
improving competitor access to these areas. It also could result
in new opportunities for the Company, as the Company is a net
purchaser of refined products in some of these areas. For a
further discussion of the potential impact of pipeline projects
on the Companys Four Corners operations, as well as other
competitive factors affecting these operations, see the
discussion of competitive factors contained in Items 1 and
2 under the heading Competitive Conditions.

The Companys refining activities are
conducted at its two refinery locations in New Mexico and the
Yorktown refinery in Virginia. These refineries constitute a
significant portion of the Companys operating assets, and
the two New Mexico refineries supply a significant portion of
the Companys retail operations. As a result, the
Companys operations would be subject to significant
interruption if any of the refineries were to experience a major
accident, be damaged by severe weather or other natural
disaster, or otherwise be forced to shut down. If any of the
refineries were to experience an interruption in supply or
operations, the Companys business, financial condition and
operating results could be materially and adversely affected.

On March 29, 2002, James E. Acridge was
terminated as President and Chief Executive Officer of the
Company and replaced as Chairman of the Board, although he
remains on the Board of Directors. For a further discussion of
matters relating to Mr. Acridge, see the discussion
included under the caption Related Party
Transactions included in Item 7 and in Note 7 to
the Companys Consolidated Financial Statements in
Item 8.



| |                           
| | --------------------------
| | Forward-Looking Statements

This report includes forward-looking statements
within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act. These statements are
included throughout this report, including in the section
entitled Managements Discussion and Analysis of
Financial Condition and Results of Operations. These
statements relate to projections of capital expenditures and
other financial items. These statements also relate to the
Companys business strategy, goals and expectations
concerning the Companys market position, future
operations, acquisitions, dispositions, margins, profitability,
liquidity and capital resources. The Company has used the words
believe, expect, anticipate,
estimate, could, plan,
intend, may, project,
predict, will and similar terms and
phrases to identify forward-looking statements in this report.

Although the Company believes the assumptions
upon which these forward-looking statements are based are
reasonable, any of these assumptions could prove to be
inaccurate, and the forward-looking statements based on these
assumptions could be incorrect. While the Company has made these
forward-looking statements in good faith and they reflect the
Companys current judgment regarding such matters, actual
results could vary materially from the forward-looking
statements.

Actual results and trends in the future may
differ materially depending on a variety of important factors.
These important factors include the following:



| |   |                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the availability of crude oil and the adequacy
    and costs of raw material supplies generally;                                                                                                                                                      
|
| |  | the Companys ability to negotiate new crude
    oil supply contracts;                                                                                                                                                                                
|
| |  | the Companys ability to successfully
    integrate the Yorktown refinery and manage the liabilities,
    including environmental liabilities, that the Company assumed in
    the Yorktown acquisition;                                              
|
| |  | the Companys ability to obtain anticipated
    levels of indemnification;                                                                                                                                                                            
|
| |  | competitive pressures from existing competitors
    and new entrants, including the potential effects of various
    pipeline projects and various actions that have been undertaken
    to increase the supply of refined products to El Paso, Texas;

42



---



##### 





| |   |                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | volatility in the difference, or spread, between
    market prices for refined products and crude oil and other
    feedstocks;                                                                                                             
|
| |  | the risk that improved refining margins
    experienced in the first quarter of 2003 will not continue;                                                                                                                                     
|
| |  | the risk that the Companys retail
    operations will not remain competitive and realize acceptable
    margins in those markets where it currently does so;                                                                               
|
| |  | the risk that improved finished product sales
    volumes and improved margins, experienced in the first quarter
    of 2003 for the Companys Phoenix Fuel operations, will not
    continue;                                              
|
| |  | the Companys ability to reduce operating
    expenses and non-essential capital expenditures;                                                                                                                                              
|
| |  | the risk that the Company will not be able to
    sell non-strategic and underperforming assets on terms favorable
    to the Company;                                                                                                      
|
| |  | the risk that the Company will not receive the
    expected amounts from the potential sale of certain retail units
    and other assets;                                                                                                   
|
| |  | state or federal legislation or regulation, or
    findings by a regulator with respect to existing operations,
    including the impact of government-mandated specifications for
    gasoline and diesel fuel on the Companys operations;
|
| |  | unplanned or extended shutdowns in refinery
    operations;                                                                                                                                                                                 
|
| |  | the risk that the Company will not remain in
    compliance with covenants, and other terms and conditions,
    contained in its notes, credit facility and loan facility;                                                                  
|
| |  | the Companys ability to achieve anticipated
    reductions in its debt;                                                                                                                                                                    
|
| |  | the risk that the Company will not be able to
    post satisfactory letters of credit;                                                                                                                                                      
|
| |  | general economic factors affecting the
    Companys operations, markets, products, services and
    prices;                                                                                                                                
|
| |  | unexpected environmental remediation costs;                                                                                                                                                                                                 
|
| |  | weather conditions affecting the Companys
    operations or the areas in which its products are refined or
    marketed;                                                                                                                   
|
| |  | the risk the Company will be found to have
    substantial liability in connection with existing or pending
    litigation;                                                                                                                 
|
| |  | the occurrence of events that cause losses for
    which the Company is not fully insured; and                                                                                                                                              
|
| |  | other risks described elsewhere in this report or
    described from time to time in the Companys filings with
    the Securities and Exchange Commission.                                                                                 

All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entity by the previous
statements. Forward-looking statements the Company makes
represent its judgment on the dates such statements are made.
The Company assumes no obligation to update any information
contained in this report or to publicly release the results of
any revisions to any forward-looking statements to reflect
events or circumstances that occur, or that the Company becomes
aware of, after the date of this report.



|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures
    about Market Risk

The information required by this item is
incorporated herein by reference to the Risk
Management section in the Companys Managements
Discussion and Analysis of Financial Condition and Results of
Operations in Item 7.

43



---



##### 





|        |                                                
|------- | -----------------------------------------------
|Item 8. | Financial Statements and Supplementary
    Data

INDEPENDENT AUDITORS REPORT

To the Board of Directors and Stockholders of

Giant Industries, Inc.


Scottsdale, Arizona


We have audited the accompanying consolidated
balance sheets of Giant Industries, Inc. and subsidiaries
(the Company) as of December 31, 2002 and 2001,
and the related consolidated statements of operations,
stockholders equity and cash flows for each of the three
years in the period ended December 31, 2002. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, such consolidated financial
statements present fairly, in all material respects, the
financial position of Giant Industries, Inc. and subsidiaries as
of December 31, 2002 and 2001, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States of
America.

As discussed in Note 1 to the financial
statements, the Company changed its method of accounting for
goodwill and other intangible assets to conform to Statement of
Financial Accounting Standards No. 142.

Also, as discussed in Note 1 to the
financial statements, the Company changed its method of
accounting for the impairment or disposal of long-lived assets
to conform to Statement of Financial Accounting Standards
No. 144.

Phoenix, Arizona

March 5, 2003


44



---



##### 



GIANT INDUSTRIES, INC. AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

|                                                                                                              |                                                                                                                       |                                                                  |         |          |         |   |         |          |         | 
|------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------- | -------- | ------- | - | ------- | -------- | ------- | 
|                                                                                                              |                                                                                                                       |                                                                 
|                                                                                                              |                                                                                                                       | December 31,                                                    
|                                                                                                              |                                                                                                                       |                                                                 
|                                                                                                              |                                                                                                                       | 2002                                                             |         | 2001    
|                                                                                                              |                                                                                                                       |                                                                  |         |         
|                                                                                                              |                                                                                                                       |                                                                 
|                                                                                                              |                                                                                                                       | (In thousands, except share                                     
|                                                                                                              |                                                                                                                       | and per share data)                                             
|ASSETS                                                                                                       
|Current assets:                                                                                               |                                                                                                                       |                                                                  |         |          |         |   |         |         
|                                                                                                              | Cash and cash equivalents                                                                                             |                                                                  | $       | 10,168   |         |   | $       | 26,326   |        
|                                                                                                              | Receivables:                                                                                                          |                                                                  |         |          |         |   |         |          |        
|                                                                                                              |                                                                                                                       | Trade, less allowance for doubtful accounts of
    $650 and $540 |         |          | 69,311  |   |         |          | 37,181  | 
|                                                                                                              |                                                                                                                       | Income tax refunds                                               |         |          | 4,359   |   |         |          | 1,497   | 
|                                                                                                              |                                                                                                                       | Other                                                            |         |          | 2,418   |   |         |          | 4,852   | 
|                                                                                                              |                                                                                                                       |                                                                  |         |          |         |   |         |         
|                                                                                                              |                                                                                                                       |                                                                  | 76,088  |          |         |   | 43,530  |         
|                                                                                                              |                                                                                                                       |                                                                  |         |          |         |   |         |         
|                                                                                                              | Inventories                                                                                                           |                                                                  |         | 108,017  |         |   |         | 57,864   |        
|                                                                                                              | Prepaid expenses and other                                                                                            |                                                                  |         | 7,877    |         |   |         | 3,661    |        
|                                                                                                              | Deferred income taxes                                                                                                 |                                                                  |         | 9,769    |         |   |         | 3,735    |        
|                                                                                                              |                                                                                                                       |                                                                  |         |          |         |   |         |         
|                                                                                                              |                                                                                                                       | Total current assets                                             |         |          | 211,919 |   |         |          | 135,116 | 
|                                                                                                              |                                                                                                                       |                                                                  |         |          |         |   |         |         
|Property, plant and equipment                                                                                 |                                                                                                                       |                                                                  | 649,861 |          |         |   | 506,718 |         
|                                                                                                              | Less accumulated depreciation and amortization                                                                        |                                                                  |         | (225,629 | )       |   |         | (197,212 | )      
|                                                                                                              |                                                                                                                       |                                                                  |         |          |         |   |         |         
|                                                                                                              |                                                                                                                       |                                                                  | 424,232 |          |         |   | 309,506 |         
|                                                                                                              |                                                                                                                       |                                                                  |         |          |         |   |         |         
|Goodwill                                                                                                      |                                                                                                                       |                                                                  | 19,465  |          |         |   | 19,815  |         
|Note and interest receivable from a related
    party, less allowance for doubtful account of $5,409 (Note 7) |                                                                                                                       |                                                                  |        |          |         |   |        |         
|Other assets                                                                                                  |                                                                                                                       |                                                                  | 46,670  |          |         |   | 42,737  |         
|                                                                                                              |                                                                                                                       |                                                                  |         |          |         |   |         |         
|                                                                                                              |                                                                                                                       | $                                                                | 702,286 |          |         | $ | 507,174 |         
|                                                                                                              |                                                                                                                       |                                                                  |         |          |         |   |         |         
|LIABILITIES AND STOCKHOLDERS
    EQUITY                                                                     
|Current liabilities:                                                                                          |                                                                                                                       |                                                                  |         |          |         |   |         |         
|                                                                                                              | Current portion of long-term debt                                                                                     |                                                                  | $       | 10,251   |         |   | $       | 45       |        
|                                                                                                              | Accounts payable                                                                                                      |                                                                  |         | 67,282   |         |   |         | 42,255   |        
|                                                                                                              | Accrued expenses                                                                                                      |                                                                  |         | 42,818   |         |   |         | 36,537   |        
|                                                                                                              |                                                                                                                       |                                                                  |         |          |         |   |         |         
|                                                                                                              |                                                                                                                       | Total current liabilities                                        |         |          | 120,351 |   |         |          | 78,837  | 
|                                                                                                              |                                                                                                                       |                                                                  |         |          |         |   |         |         
|Long-term debt, net of current portion                                                                        |                                                                                                                       |                                                                  | 398,069 |          |         |   | 256,749 |         
|Deferred income taxes                                                                                         |                                                                                                                       |                                                                  | 37,612  |          |         |   | 32,772  |         
|Other liabilities and deferred income                                                                         |                                                                                                                       |                                                                  | 18,937  |          |         |   | 2,406   |         
|Commitments and contingencies (Notes 4, 7, 11,
    12, 14, 15, 16, 17, 18)                                    |                                                                                                                       |                                                                  |         |          |         |   |         |         
|Stockholders equity:                                                                                         |                                                                                                                       |                                                                  |         |          |         |   |         |         
|                                                                                                              | Preferred stock, par value $.01 per share,
    10,000,000 shares authorized, none issued                              |                                                                  |         |          |         |   |         |          |        
|                                                                                                              | Common stock, par value $.01 per share,
    50,000,000 shares authorized, 12,323,759 and 12,305,859 shares
    issued |                                                                  |         | 123      |         |   |         | 123      |        
|                                                                                                              | Additional paid-in capital                                                                                            |                                                                  |         | 73,763   |         |   |         | 73,589   |        
|                                                                                                              | Retained earnings                                                                                                     |                                                                  |         | 89,885   |         |   |         | 99,152   |        
|                                                                                                              |                                                                                                                       |                                                                  |         |          |         |   |         |         
|                                                                                                              |                                                                                                                       |                                                                  | 163,771 |          |         |   | 172,864 |         
|                                                                                                              | Less common stock in treasury  at
    cost, 3,751,980 shares                                                         |                                                                  |         | (36,454  | )       |   |         | (36,454  | )      
|                                                                                                              |                                                                                                                       |                                                                  |         |          |         |   |         |         
|                                                                                                              |                                                                                                                       | Total stockholders equity                                       |         |          | 127,317 |   |         |          | 136,410 | 
|                                                                                                              |                                                                                                                       |                                                                  |         |          |         |   |         |         
|                                                                                                              |                                                                                                                       | $                                                                | 702,286 |          |         | $ | 507,174 |         
|                                                                                                              |                                                                                                                       |                                                                  |         |          |         |   |         |         

The accompanying notes are an integral part of
these consolidated financial statements.

45



---



##### 



GIANT INDUSTRIES, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |      |       |  
|------------------------------------------------------------------ | -------------------------------------------------- | ------------------------------------- | --------- | ------ | ----- | ---- | ------- | ---- | ----- | - | --------- | ---- | ----- | -
|                                                                   |                                                    |                                      
|                                                                   |                                                    | Year Ended December 31,              
|                                                                   |                                                    |                                      
|                                                                   |                                                    | 2002                                  |           | 2001   |       | 2000
|                                                                   |                                                    |                                       |           |        |       |     
|                                                                   |                                                    |                                      
|                                                                   |                                                    | (In thousands, except per share data)
|Net revenues                                                       |                                                    | $                                     | 1,287,052 |        |       | $    | 951,344 |      |       | $ | 1,057,619 |     
|Cost of products sold                                              |                                                    |                                       | 1,073,013 |        |       |      | 728,699 |      |       |   | 850,464   |     
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|Gross margin                                                       |                                                    |                                       | 214,039   |        |       |      | 222,645 |      |       |   | 207,155   |     
|Operating expenses                                                 |                                                    |                                       | 134,276   |        |       |      | 107,431 |      |       |   | 115,345   |     
|Depreciation and amortization                                      |                                                    |                                       | 36,064    |        |       |      | 31,857  |      |       |   | 31,739    |     
|Selling, general and administrative expenses                       |                                                    |                                       | 24,550    |        |       |      | 27,864  |      |       |   | 25,373    |     
|Net (gain) loss on the disposal/write-down of
    assets           |                                                    |                                       | 116       |        |       |      | 6,132   |      |       |   | (13       | )   
|Allowance for related party note and interest
    receivable       |                                                    |                                       |          |        |       |      | 5,409   |      |       |   |          |     
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|Operating income                                                   |                                                    |                                       | 19,033    |        |       |      | 43,952  |      |       |   | 34,711    |     
|Interest expense                                                   |                                                    |                                       | (36,308   | )      |       |      | (24,098 | )    |       |   | (24,411   | )   
|Amortization/write-off of financing costs                          |                                                    |                                       | (3,256    | )      |       |      | (764    | )    |       |   | (818      | )   
|Interest and investment income                                     |                                                    |                                       | 432       |        |       |      | 1,661   |      |       |   | 1,989     |     
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|Earnings (loss) from continuing operations before
    income taxes |                                                    |                                       | (20,099   | )      |       |      | 20,751  |      |       |   | 11,471    |     
|Provision (benefit) for income taxes                               |                                                    |                                       | (8,086    | )      |       |      | 7,984   |      |       |   | 4,102     |     
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|Earnings (loss) from continuing operations                         |                                                    |                                       | (12,013   | )      |       |      | 12,767  |      |       |   | 7,369     |     
|Discontinued operations (Note 5)                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|                                                                   | Loss from operations of discontinued retail assets |                                       |           | (1,434 | )     |      |         | (563 | )     |   |           | (134 | )    
|                                                                   | Gain on disposal                                   |                                       |           | 6,464  |       |      |         |     |       |   |           |     |      
|                                                                   | Net loss on asset sales/write-downs                |                                       |           | (454   | )     |      |         | (80  | )     |   |           |     |      
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|                                                                   |                                                    |                                       | 4,576     |        |       |      | (643    | )    |       |   | (134      | )   
|                                                                   | Provision (benefit) for income taxes               |                                       |           | 1,830  |       |      |         | (257 | )     |   |           | (54  | )    
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|                                                                   | Earnings (loss) from discontinued operations       |                                       |           | 2,746  |       |      |         | (386 | )     |   |           | (80  | )    
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|Net earnings (loss)                                                |                                                    | $                                     | (9,267    | )      |       | $    | 12,381  |      |       | $ | 7,289     |     
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|Net earnings (loss) per common share:                              |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|                                                                   | Basic                                              |                                       |           |        |       |      |         |      |       |   |           |      |      
|                                                                   |                                                    | Continuing operations                 |           | $      | (1.40 | )    |         | $    | 1.44  |   |           | $    | 0.80  |  
|                                                                   |                                                    | Discontinued operations               |           |        | 0.32  |      |         |      | (0.04 | ) |           |      | (0.01 | )
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|                                                                   |                                                    | $                                     | (1.08     | )      |       | $    | 1.40    |      |       | $ | 0.79      |     
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|                                                                   | Assuming dilution                                  |                                       |           |        |       |      |         |      |       |   |           |      |      
|                                                                   |                                                    | Continuing operations                 |           | $      | (1.40 | )    |         | $    | 1.43  |   |           | $    | 0.80  |  
|                                                                   |                                                    | Discontinued operations               |           |        | 0.32  |      |         |      | (0.04 | ) |           |      | (0.01 | )
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     
|                                                                   |                                                    | $                                     | (1.08     | )      |       | $    | 1.39    |      |       | $ | 0.79      |     
|                                                                   |                                                    |                                       |           |        |       |      |         |      |       |   |           |     

The accompanying notes are an integral part of
these consolidated financial statements.

46



---



##### 



GIANT INDUSTRIES, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY

|                                                  |  |                                         |            |            |  |         |     |                |  |        |        |               |  |        |        |   |  |  |           |  |  |   |         |   |  |   |         |  
|------------------------------------------------- |  | --------------------------------------- | ---------- | ---------- |  | ------- | --- | -------------- |  | ------ | ------ | ------------- |  | ------ | ------ | - |  |  | --------- |  |  | - | ------- | - |  | - | ------- | -
|                                                  |  |                                         |            |            |  |         |     |                |  |        |        |              
|                                                  |  | Common Stock                            |            |            |  |         |     |                |  |        |        |              
|                                                  |  |                                         |            |            |  |         |     |                |  |       
|                                                  |  |                                         |            | Additional |  |         |     | Treasury Stock |  | Total 
|                                                  |  | Shares                                  |            | Par        |  | Paid-in |     | Retained       |  |        |        | Stockholders
|                                                  |  | Issued                                  |            | Value      |  | Capital |     | Earnings       |  | Shares |        | Cost          |  | Equity
|                                                  |  |                                         |            |            |  |         |     |                |  |        |        |               |  |       
|                                                  |  |                                        
|                                                  |  | (In thousands, except number of shares)
|Balances, January 1, 2000                         |  |                                         | 12,266,188 |            |  | $       | 122 |                |  | $      | 72,990 |               |  | $      | 79,973 |   |  |  | 1,962,700 |  |  | $ | (20,623 | ) |  | $ | 132,462 |  
|Purchase of treasury stock                        |  |                                         |           |            |  |         |    |                |  |        |       |               |  |        |       |   |  |  | 1,371,980 |  |  |   | (12,157 | ) |  |   | (12,157 | )
|Stock options exercised                           |  |                                         | 16,500     |            |  |         |    |                |  |        | 109    |               |  |        |       |   |  |  |          |  |  |   |        |   |  |   | 109     |  
|Net earnings                                      |  |                                         |           |            |  |         |    |                |  |        |       |               |  |        | 7,289  |   |  |  |          |  |  |   |        |   |  |   | 7,289   |  
|                                                  |  |                                         |            |            |  |         |     |                |  |        |        |               |  |        |        |   |  |  |           |  |  |   |         |   |  |   |         |  
|Balances, December 31, 2000                       |  |                                         | 12,282,688 |            |  |         | 122 |                |  |        | 73,099 |               |  |        | 87,262 |   |  |  | 3,334,680 |  |  |   | (32,780 | ) |  |   | 127,703 |  
|Purchase of treasury stock                        |  |                                         |           |            |  |         |    |                |  |        |       |               |  |        |       |   |  |  | 417,300   |  |  |   | (3,674  | ) |  |   | (3,674  | )
|Stock options exercised                           |  |                                         | 126,601    |            |  |         | 2   |                |  |        | 1,105  |               |  |        |       |   |  |  |          |  |  |   |        |   |  |   | 1,107   |  
|Shares cancelled on net exercise of stock options |  |                                         | (103,430   | )          |  |         | (1  | )              |  |        | (615   | )             |  |        | (491   | ) |  |  |          |  |  |   |        |   |  |   | (1,107  | )
|Net earnings                                      |  |                                         |           |            |  |         |    |                |  |        |       |               |  |        | 12,381 |   |  |  |          |  |  |   |        |   |  |   | 12,381  |  
|                                                  |  |                                         |            |            |  |         |     |                |  |        |        |               |  |        |        |   |  |  |           |  |  |   |         |   |  |   |         |  
|Balances, December 31, 2001                       |  |                                         | 12,305,859 |            |  |         | 123 |                |  |        | 73,589 |               |  |        | 99,152 |   |  |  | 3,751,980 |  |  |   | (36,454 | ) |  |   | 136,410 |  
|Stock options exercised                           |  |                                         | 17,900     |            |  |         |    |                |  |        | 94     |               |  |        |       |   |  |  |          |  |  |   |        |   |  |   | 94      |  
|Stock option compensation                         |  |                                         |           |            |  |         |    |                |  |        | 80     |               |  |        |       |   |  |  |          |  |  |   |        |   |  |   | 80      |  
|Net loss                                          |  |                                         |           |            |  |         |    |                |  |        |       |               |  |        | (9,267 | ) |  |  |          |  |  |   |        |   |  |   | (9,267  | )
|                                                  |  |                                         |            |            |  |         |     |                |  |        |        |               |  |        |        |   |  |  |           |  |  |   |         |   |  |   |         |  
|Balances, December 31, 2002                       |  |                                         | 12,323,759 |            |  | $       | 123 |                |  | $      | 73,763 |               |  | $      | 89,885 |   |  |  | 3,751,980 |  |  | $ | (36,454 | ) |  | $ | 127,317 |  
|                                                  |  |                                         |            |            |  |         |     |                |  |        |        |               |  |        |        |   |  |  |           |  |  |   |         |   |  |   |         |  

The accompanying notes are an integral part of
these consolidated financial statements.

47



---



##### 



GIANT INDUSTRIES, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                 |                                                                                                |                                                                                                    |                                                   |          |        |         |         |         |        |         |         |         |        |         |  
|------------------------------------------------ | ---------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | ------------------------------------------------- | -------- | ------ | ------- | ------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | -
|                                                 |                                                                                                |                                                                                                   
|                                                 |                                                                                                | Year Ended December 31,                                                                           
|                                                 |                                                                                                |                                                                                                   
|                                                 |                                                                                                | 2002                                                                                               |                                                   | 2001     |        | 2000   
|                                                 |                                                                                                |                                                                                                    |                                                   |          |        |        
|                                                 |                                                                                                |                                                                                                   
|                                                 |                                                                                                | (In thousands)                                                                                    
|Cash flows from operating activities:            |                                                                                                |                                                                                                    |                                                   |          |        |         |         |         |        |         |         |        
|                                                 | Net earnings (loss)                                                                            |                                                                                                    | $                                                 | (9,267   | )      |         | $       | 12,381  |        |         | $       | 7,289   |       
|                                                 | Adjustments to reconcile net earnings
    (loss) to net cash provided by operating activities: |                                                                                                    |                                                   |          |        |         |         |         |        |         |         |         |       
|                                                 |                                                                                                | Depreciation and amortization, including
    discontinued operations                               |                                                   |          | 37,134 |         |         |         | 33,111 |         |         |         | 32,761 |        
|                                                 |                                                                                                | Amortization/write-off of financing costs                                                          |                                                   |          | 3,256  |         |         |         | 764    |         |         |         | 818    |        
|                                                 |                                                                                                | Deferred income taxes                                                                              |                                                   |          | 131    |         |         |         | 4,169  |         |         |         | (432   | )      
|                                                 |                                                                                                | Deferred lease expense                                                                             |                                                   |          |       |         |         |         | 296    |         |         |         | 791    |        
|                                                 |                                                                                                | Allowance for related party note and interest
    receivable                                       |                                                   |          |       |         |         |         | 5,409  |         |         |         |       |        
|                                                 |                                                                                                | Net (gain) loss on the disposal of assets
    included in continuing operations                    |                                                   |          | (1,401 | )       |         |         | 609    |         |         |         | (112   | )      
|                                                 |                                                                                                | Net gain on disposal of discontinued operations                                                    |                                                   |          | (6,464 | )       |         |         |       |         |         |         |       |        
|                                                 |                                                                                                | Loss on write-down/write-off of assets included
    in continuing operations                       |                                                   |          | 1,517  |         |         |         | 5,523  |         |         |         | 99     |        
|                                                 |                                                                                                | Loss on write-down/write-off of assets included
    in discontinued operations                     |                                                   |          | 454    |         |         |         | 80     |         |         |         |       |        
|                                                 |                                                                                                | Interest received on related party note receivable                                                 |                                                   |          |       |         |         |         | 938    |         |         |         |       |        
|                                                 |                                                                                                | Interest accrued on related party note receivable                                                  |                                                   |          |       |         |         |         | (537   | )       |         |         | (539   | )      
|                                                 |                                                                                                | Other                                                                                              |                                                   |          | (171   | )       |         |         | 1,344  |         |         |         | (793   | )      
|                                                 |                                                                                                | Changes in operating assets and liabilities
    excluding the effects of the Yorktown acquisition: |                                                   |          |        |         |         |         |        |         |         |         |        |        
|                                                 |                                                                                                |                                                                                                    | (Increase) decrease in receivables                |          |        | (32,558 | )       |         |        | 32,177  |         |         |        | (571    | )
|                                                 |                                                                                                |                                                                                                    | Decrease (increase) in inventories                |          |        | 18,831  |         |         |        | (4,645  | )       |         |        | 1,640   |  
|                                                 |                                                                                                |                                                                                                    | (Increase) decrease in prepaid expenses and other |          |        | (4,230  | )       |         |        | (133    | )       |         |        | 479     |  
|                                                 |                                                                                                |                                                                                                    | Increase (decrease) in accounts payable           |          |        | 25,027  |         |         |        | (24,206 | )       |         |        | (10,372 | )
|                                                 |                                                                                                |                                                                                                    | Increase (decrease) in accrued expenses           |          |        | 5,809   |         |         |        | (2,024  | )       |         |        | (1,566  | )
|                                                 |                                                                                                |                                                                                                    |                                                   |          |        |         |         |         |        |         |         |        
|Net cash provided by operating activities        |                                                                                                |                                                                                                    | 38,068                                            |          |        |         | 65,256  |         |        |         | 29,492  |        
|                                                 |                                                                                                |                                                                                                    |                                                   |          |        |         |         |         |        |         |         |        
|Cash flows from investing activities:            |                                                                                                |                                                                                                    |                                                   |          |        |         |         |         |        |         |         |        
|                                                 | Yorktown refinery acquisition                                                                  |                                                                                                    |                                                   | (194,733 | )      |         |         |        |        |         |         |        |       
|                                                 | Capital expenditures                                                                           |                                                                                                    |                                                   | (12,990  | )      |         |         | (57,056 | )      |         |         | (22,455 | )     
|                                                 | Purchases of other assets                                                                      |                                                                                                    |                                                   |         |        |         |         | (5,602  | )      |         |         |        |       
|                                                 | Refinery acquisition contingent payment                                                        |                                                                                                    |                                                   |         |        |         |         | (5,139  | )      |         |         | (5,442  | )     
|                                                 | Proceeds from sale of property, plant and
    equipment and other assets                       |                                                                                                    |                                                   | 19,517   |        |         |         | 7,889   |        |         |         | 4,473   |       
|                                                 |                                                                                                |                                                                                                    |                                                   |          |        |         |         |         |        |         |         |        
|Net cash used by investing activities            |                                                                                                |                                                                                                    | (188,206                                          | )        |        |         | (59,908 | )       |        |         | (23,424 | )      
|                                                 |                                                                                                |                                                                                                    |                                                   |          |        |         |         |         |        |         |         |        
|Cash flows from financing activities:            |                                                                                                |                                                                                                    |                                                   |          |        |         |         |         |        |         |         |        
|                                                 | Proceeds of long-term debt                                                                     |                                                                                                    |                                                   | 234,144  |        |         |         |        |        |         |         | 68,000  |       
|                                                 | Payments of long-term debt                                                                     |                                                                                                    |                                                   | (107,822 | )      |         |         | (1,429  | )      |         |         | (68,347 | )     
|                                                 | Proceeds from line of credit                                                                   |                                                                                                    |                                                   | 93,000   |        |         |         |        |        |         |         |        |       
|                                                 | Payments on line of credit                                                                     |                                                                                                    |                                                   | (68,000  | )      |         |         |        |        |         |         |        |       
|                                                 | Purchase of treasury stock                                                                     |                                                                                                    |                                                   |         |        |         |         | (3,674  | )      |         |         | (12,157 | )     
|                                                 | Deferred financing costs                                                                       |                                                                                                    |                                                   | (17,436  | )      |         |         | (537    | )      |         |         |        |       
|                                                 | Proceeds from exercise of stock options                                                        |                                                                                                    |                                                   | 94       |        |         |         |        |        |         |         | 109     |       
|                                                 |                                                                                                |                                                                                                    |                                                   |          |        |         |         |         |        |         |         |        
|Net cash provided (used) by financing activities |                                                                                                |                                                                                                    | 133,980                                           |          |        |         | (5,640  | )       |        |         | (12,395 | )      
|                                                 |                                                                                                |                                                                                                    |                                                   |          |        |         |         |         |        |         |         |        
|Net decrease in cash and cash equivalents        |                                                                                                |                                                                                                    | (16,158                                           | )        |        |         | (292    | )       |        |         | (6,327  | )      
|                                                 | Cash and cash equivalents:                                                                     |                                                                                                    |                                                   |          |        |         |         |         |        |         |         |         |       
|                                                 |                                                                                                | Beginning of year                                                                                  |                                                   |          | 26,326 |         |         |         | 26,618 |         |         |         | 32,945 |        
|                                                 |                                                                                                |                                                                                                    |                                                   |          |        |         |         |         |        |         |         |        
|                                                 |                                                                                                | End of year                                                                                        |                                                   | $        | 10,168 |         |         | $       | 26,326 |         |         | $       | 26,618 |        
|                                                 |                                                                                                |                                                                                                    |                                                   |          |        |         |         |         |        |         |         |        
|Income taxes (refunded)/paid                     |                                                                                                | $                                                                                                  | (3,466                                            | )        |        | $       | 4,675   |         |        | $       | 4,060   |        
|                                                 |                                                                                                |                                                                                                    |                                                   |          |        |         |         |         |        |         |         |        
|Interest paid                                    |                                                                                                | $                                                                                                  | 34,426                                            |          |        | $       | 24,135  |         |        | $       | 24,458  |        
|                                                 |                                                                                                |                                                                                                    |                                                   |          |        |         |         |         |        |         |         |        

The accompanying notes are an integral part of
these consolidated financial statements.

48



---



##### 



Significant Noncash Investing and Financing
Activities.During 2002, the Company
issued $200,000,000 of 11% Senior Subordinated Notes at a
discount of $5,856,000. During 2001, the Company received
103,430 shares of its own common stock valued at
approximately $1,107,000 from James E. Acridge, the
Companys former Chairman, President and Chief Executive
Officer (the Former CEO), as payment for the
exercise by the Former CEO of 126,601 common stock options.
These shares were immediately cancelled. In addition, the
Company repurchased, for cash, 59 service station/ convenience
stores from FFCA Capital Holding Corporation (FFCA)
for approximately $38,052,000 plus closing costs. These service
station/convenience stores had been sold to FFCA in a
sale-leaseback transaction completed in December 1998. Certain
deferrals on the Balance Sheet relating to the sale-leaseback
transaction reduced the cost basis of the assets recorded in
Property, Plant and Equipment by approximately
$1,736,000. These deferrals included a deferred gain on the
original sale to FFCA and deferred lease allocations included in
Other Liabilities and Deferred Income, and deferred
costs associated with the original sale included in Other
Assets. During 2000, approximately $5,200,000 was incurred
as a contingent payment related to the 1995 acquisition of the
Bloomfield refinery. This amount was adjusted downward in 2001
to $5,139,000, the amount that was actually paid.

49



---



##### 



GIANT INDUSTRIES, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

Note 1  Description of Business and
Significant Accounting Policies



| |             
| | ------------
| | Organization

Giant Industries, Inc., a Delaware corporation
(together with its subsidiaries, Giant or the
Company), through its wholly-owned subsidiary Giant
Industries Arizona, Inc. and its subsidiaries (Giant
Arizona), is engaged in the refining and marketing of
petroleum products. These operations are conducted on both the
East Coast (primarily in Virginia, Maryland, North and South
Carolina and the New York Harbor) and in the Southwest
(primarily in New Mexico, Arizona, and Colorado, with a
concentration in the Four Corners area where these states
adjoin). In addition, Phoenix Fuel Co., Inc. (Phoenix
Fuel), a wholly-owned subsidiary of Giant Arizona,
operates an industrial/commercial wholesale petroleum products
distribution operation primarily in Arizona.

The Company currently has three strategic
business units, the Refining Group, the Retail Group and Phoenix
Fuel. Other company operations, consisting primarily of the
Companys corporate staff operations, are not included in
any of the strategic business units. The Company believes that
the Refining Group, the Retail Group and Phoenix Fuel are its
only material business segments for financial reporting
purposes. See the discussion of Company segments contained in
Note 2.



| |                        
| | -----------------------
| | Description of Business

The Refining Group operates the Companys
Ciniza and Bloomfield refineries in the Four Corners area of New
Mexico and the Yorktown refinery in Virginia. The Ciniza
refinery, with a crude oil throughput capacity of
20,800 barrels per day (bpd) and a total
capacity including natural gas liquids of 26,000 bpd, is
located near Gallup, New Mexico. The Bloomfield refinery, with a
crude oil throughput capacity of 16,000 bpd and a total
capacity including natural gas liquids of 16,600 bpd, is
located in Bloomfield, New Mexico. The Yorktown refinery, with a
crude oil throughput capacity of 61,900 bpd, is located
along the York River in Yorktown, Virginia. In addition to these
three refineries, the Refining Group operates a crude oil
gathering pipeline system in New Mexico that services the Four
Corners refineries, two finished products distribution
terminals, and a fleet of crude oil and finished product truck
transports. The Companys three refineries manufacture
various grades of gasoline, diesel fuel, and other products from
crude oil, other feedstocks, and blending components. In
addition, finished products are acquired through exchange
agreements, from third party suppliers and from Phoenix Fuel.
These products are sold through Company-operated retail
facilities, independent wholesalers and retailers, industrial/
commercial accounts, and sales and exchanges with major oil
companies. Crude oil, other feedstocks and blending components
are purchased from third party suppliers.

The Retail Group operates the Companys
service stations, which include convenience stores or kiosks,
and one travel center. These operations sell various grades of
gasoline, diesel fuel, general merchandise, including tobacco
and alcoholic and nonalcoholic beverages, and food products to
the general public through retail locations. The Refining Group
or Phoenix Fuel supplies the petroleum fuels sold by the Retail
Group. General merchandise and food products are obtained from
third party suppliers. At December 31, 2002, the Company
operated 135 retail service stations with convenience stores or
kiosks.

The Companys Phoenix Fuel operation is an
industrial/commercial wholesale petroleum products distribution
operation, which includes several lubricant and bulk petroleum
distribution plants, an unmanned fleet fueling
(cardlock) operation, a bulk lubricant terminal
facility, and a fleet of finished product and lubricant delivery
trucks. The petroleum fuels and lubricants sold are primarily
obtained from third party suppliers and to a lesser extent from
the Refining Group.

See Note 2 for a further discussion of
business segments and Notes 4 and 5 for recent acquisitions
and dispositions.

50



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##### 





| |                            
| | ---------------------------
| | Principles of Consolidation

The consolidated financial statements include the
accounts of Giant and all of its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.



| |                                                                
| | ---------------------------------------------------------------
| | Use of Estimates in the Preparation of
    Financial Statements

The preparation of the Companys
consolidated financial statements, in conformity with accounting
principles generally accepted in the United States of America,
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.



| |             
| | ------------
| | Net Revenues

Revenues are recognized from sales when product
ownership is transferred to the customer. Excise and other
similar taxes are excluded from net revenues.



| |                         
| | ------------------------
| | Statements of Cash Flows

All highly liquid instruments with an original
maturity of three months or less are considered to be cash
equivalents.



| |            
| | -----------
| | Derivatives

The Companys policies for trading and the
use of derivative financial instruments set limits on
quantities, requires various levels of approval and requires
certain review and reporting procedures.

The Company is exposed to various market risks,
including changes in certain commodity prices and interest
rates. To manage the volatility relating to these normal
business exposures, the Company, from time to time, uses
commodity futures and options contracts to reduce price
volatility, to fix margins in its refining and marketing
operations and to protect against price declines associated with
its crude oil and finished products inventories. For purposes of
the Statement of Cash Flows, such transactions are considered to
be operating activities.

Gains and losses on all transactions that do not
qualify for hedge accounting are reflected in earnings in the
period that they occur.

The Company had no open commodity futures or
options contracts at December 31, 2002.



| |                             
| | ----------------------------
| | Concentration of Credit Risk

Credit risk with respect to customer receivables
is concentrated in the geographic areas in which the Company
operates and relates primarily to customers in the oil and gas
industry. To minimize this risk, the Company performs ongoing
credit evaluations of its customers financial position and
requires collateral, such as letters of credit, in certain
circumstances. The Company maintained its cash and cash
equivalents with federally insured banking institutions or other
financial service providers. From time to time, balances
maintained in these institutions may exceed amounts that are
federally insured. All of the financial institutions used by the
Company are major banking institutions and financial service
providers of the highest quality.



| |            
| | -----------
| | Inventories

Inventories are stated at the lower of cost or
market. Costs for crude oil and refined products produced by the
refineries, and the lubricants and other merchandise of Phoenix
Fuel, are determined by the last-in, first-out
(LIFO) method. Costs for retail, exchange and
terminal refined products and shop supplies are determined by
the first-in, first-out (FIFO) method. Costs for
merchandise inventories at retail locations are determined by
the retail inventory method.

51



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##### 





| |                              
| | -----------------------------
| | Property, Plant and Equipment

Property, plant and equipment are stated at cost
and are depreciated on the straight-line method over their
respective estimated useful lives.

The estimated useful lives for the various
categories of property, plant and equipment are:

|                           |  |  |            | 
|-------------------------- |  |  | ---------- | 
|Buildings and improvements |  |  | 7-30 years | 
|Machinery and equipment    |  |  | 7-24 years | 
|Pipelines                  |  |  | 30 years   | 
|Furniture and fixtures     |  |  | 2-15 years | 
|Vehicles                   |  |  | 3-7 years  | 

Routine maintenance, repairs and replacement
costs are charged against earnings as incurred. Turnaround
costs, which consist of complete shutdown and inspection of
significant units of the refineries at intervals of two or more
years for necessary repairs and replacements, are deferred and
amortized over the period until the next expected shutdown,
which generally ranges from 24 to 48 months depending on
the type of shutdown and the unit involved. Expenditures which
materially increase values, expand capacities or extend useful
lives are capitalized. Interest expense is capitalized as part
of the cost of constructing major facilities and equipment.

The American Institute of Certified Public
Accountants (AICPA) has issued a proposed Statement
of Position (SOP) on Fixed Asset and Maintenance
Accounting (including turnaround accounting and asset
replacement accounting). This SOP, as proposed, would address
accounting and disclosure issues related to:
(1) determining which costs related to property, plant and
equipment (PP&E) should be capitalized as
improvements and which should be expensed as repairs and
maintenance; (2) the capitalization of indirect and
overhead costs; (3) the componentization of PP&E for
depreciation purposes; and (4) accounting for a planned
major maintenance activity (e.g., refinery turnaround). In
November 2002, the AICPA announced they would no longer issue
general purpose SOPs. The work they have performed on the
proposed SOP will be transitioned to the FASB staff. The Company
awaits further guidance from the FASB staff on the timing of the
final standard.



| |         
| | --------
| | Goodwill

On January 1, 2002, the Company adopted
Statement of Financial Accounting Standards (SFAS)
No. 142, Goodwill and Other Intangible Assets.
This Statement requires, among other things, that goodwill not
be amortized, but be tested for impairment annually, or as
events and circumstances indicate. See Note 3 for
applicable disclosures.

Goodwill, which results from business
acquisitions, represents the excess of the purchase price over
the fair value of the net assets acquired and is carried at cost
less accumulated amortization and write-offs. Prior to
January 1, 2002, goodwill was being amortized on the
straight-line method over the period of expected benefit ranging
from 15 to 30 years.



| |                  
| | -----------------
| | Long-Lived Assets

On January 1, 2002, the Company adopted SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. This Statement defines impairment as
the condition that exists when the carrying amount of a
long-lived asset (asset group) is not recoverable and exceeds
its fair value. The Statement provides for a single
accounting model for the disposal of long-lived assets, whether
previously held or newly acquired. Specific guidance is provided
for recognition and measurement and reporting and disclosure for
long-lived assets held and used, disposed of other than by sale,
and disposed of by sale. This new standard had no impact on the
Companys financial position and results of operations at
adoption.

In accordance with SFAS No. 144, the Company
reviews the carrying values of its long-lived assets for
possible impairment whenever events or changes in circumstances
indicate that the carrying amount of assets

52



---



##### 



to be held and used may not be recoverable. For
assets to be disposed of, the Company reports long-lived assets
and certain identifiable intangibles at the lower of carrying
amount or fair value less cost to sell. See Note 5 for
information relating to the impairment of certain assets.




| |               
| | --------------
| | Treasury Stock

The Companys Board of Directors (the
Board) previously authorized the repurchase of up to
2,900,000 shares of the Companys common stock. These
purchases could be made from time to time as conditions permit.
Shares could be repurchased through privately negotiated
transactions, block share purchases and open market
transactions. The Companys authority to repurchase shares
under this program expired in the second quarter of 2002. Since
the inception of the stock repurchase program, the Company has
repurchased 2,582,566 shares for approximately $25,716,000,
resulting in a weighted average cost of $9.96 per share. The
repurchased shares are treated as treasury shares. Shares
repurchased under the Companys program are available for a
number of corporate purposes including, among other things, for
options, bonuses, and other employee stock benefit plans. In
addition, the Company purchased 1,169,414 shares of its
common stock, as treasury shares, for $9.00 per share, net to
the sellers, through a Schedule 13E-4 Issuer Tender Offer
completed on February 8, 2000.



| |                           
| | --------------------------
| | Environmental Expenditures

Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past
operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when
environmental assessments and/or remedial efforts are probable
and the costs can be reasonably estimated. Environmental
liabilities are not discounted to their present value and are
recorded without consideration of potential recoveries from
third parties. Subsequent adjustments to estimates, which may be
significant, may be made as more information becomes available
or as circumstances change. See Note 18.



| |             
| | ------------
| | Income Taxes

The provision for income taxes is based on
earnings (loss) reported in the financial statements. Deferred
income taxes are provided to reflect temporary differences
between the basis of assets and liabilities for financial
reporting purposes and income tax purposes, as well as the
effects of tax credits.



| |                          
| | -------------------------
| | Earnings Per Common Share

Earnings per share are calculated in accordance
with SFAS No. 128, Earnings Per Share. Basic
earnings per common share are computed by dividing consolidated
net earnings by the weighted average number of shares of common
stock outstanding during each period. Earnings per common share
assuming dilution is computed by dividing consolidated net
earnings by the sum of the weighted average number of shares of
common stock outstanding plus additional shares representing the
exercise of outstanding common stock options using the treasury
stock method, unless such calculation is antidilutive. See Note
6.



| |                              
| | -----------------------------
| | New Accounting Pronouncements

In June 2001, the Financial Accounting Standards
Board (FASB) issued SFAS No. 143,
Accounting for Asset Retirement Obligations. This
Statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. It
applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition,
construction, development and/or the normal operation of a
long-lived asset, except for certain obligations of lessees. As
used in this Statement, a legal obligation is an obligation that
a party is required to settle as a result of an existing or
enacted law, statute, ordinance, or written or oral contract, or
by legal construction of a contract under the doctrine of
promissory estoppel.

SFAS No. 143 requires that the fair value of
a liability for an asset retirement obligation be recognized in
the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated asset

53



---



##### 



retirement costs are capitalized as part of the
carrying amount of the long-lived asset. This Statement is
effective for financial statements issued for fiscal years
beginning after June 15, 2002. The Company is in the
process of evaluating the effect SFAS No. 143 will have
relative to its assets.


In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections, which supersedes previous guidance for
reporting gains and losses from, among other things,
extinguishment of debt and accounting for leases. The portion of
the Statement relating to the early extinguishment of debt is
effective for the Company beginning in 2003. The Company does
not believe the adoption of this statement will have a material
impact on its financial statements.

In July 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. The Standard requires companies to recognize
costs associated with exit or disposal activities when they are
incurred, rather than at the date of a commitment to an exit or
disposal plan. The guidance will be applied prospectively to
exit or disposal activities initiated after December 31,
2002.

In December 2002, the FASB issued SFAS
No. 148 Accounting for Stock-Based
Compensation  Transition and Disclosure
(SFAS 148). SFAS 148 amends SFAS 123
to permit alternative methods of transition for adopting a fair
value based method of accounting for stock-based employee
compensation. The Company uses the intrinsic value method to
account for stock-based employee compensation. The Company is
evaluating whether or not it will adopt the provisions of SFAS
No. 148 in 2003.

In November 2002, the FASB issued FASB
Interpretation No. 45 Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (Interpretation
45). Interpretation 45 elaborates on existing disclosure
requirements for guarantees and clarifies that a guarantor is
required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in
issuing the guarantee. The initial recognition and measurement
provisions of Interpretation 45 apply on a prospective basis to
guarantees issued or modified after December 31, 2002. As of
December 31, 2002, the Company had no significant
guarantees for which disclosure was required.

In January 2003, the FASB issued FASB
Interpretation No. 46 Consolidation of Variable
Interest Entities (Interpretation 46).
Interpretation 46 clarifies the application of existing
consolidation requirements to entities where a controlling
financial interest is achieved through arrangements that do not
involve voting interests. Under Interpretation 46, a variable
interest entity is consolidated if a company is subject to a
majority of the risk of loss from the variable interest
entitys activities or entitled to receive a majority of
the entitys residual returns. Interpretation 46 applies to
variable interest entities created or acquired after
January 31, 2003. For variable interest entities existing
at January 31, 2003, Interpretation 46 is effective for
accounting periods beginning after June 15, 2003. The
application of Interpretation 46 is not expected to have a
material effect on the Companys financial statements.



| |                           
| | --------------------------
| | Other Comprehensive Income

For the years ended December 31, 2002, 2001,
and 2000, respectively, the only component of other
comprehensive income is net income as reported on the
Companys Consolidated Statements of Operations.



| |                  
| | -----------------
| | Reclassifications

Certain reclassifications have been made to prior
years consolidated financial statements to conform to the
statement classifications used in the current year. These
reclassifications relate primarily to the discontinued operation
requirements of SFAS No. 144 adopted by the Company on
January 1, 2002. These reclassifications had no effect on
reported earnings or stockholders equity.

54



---



##### 



Note 2  Business Segments

The Company is organized into three operating
segments based on manufacturing and marketing criteria. These
segments are the Refining Group, the Retail Group and Phoenix
Fuel. A description of each segment and its principal products
follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Refining Group:The
    Refining Group operates the Companys Ciniza and Bloomfield
    refineries in the Four Corners area of New Mexico and the
    Yorktown refinery in Virginia acquired on May 14, 2002. In
    addition to these three refineries, the refining group operates
    a crude oil gathering pipeline system in New Mexico that
    services the Four Corners refineries, two finished products
    distribution terminals, and a fleet of crude oil and finished
    product truck transports. The Companys three refineries
    manufacture various grades of gasoline, diesel fuel, and other
    products from crude oil, other feedstocks, and blending
    components. In addition, finished products are acquired through
    exchange agreements, from third party suppliers and from Phoenix
    Fuel. These products are sold through Company-operated retail
    facilities, independent wholesalers and retailers,
    industrial/commercial accounts, and sales and exchanges with
    major oil companies. Crude oil, other feedstocks and blending
    components are purchased from third party suppliers.
|
| |  | Retail Group:The
    Retail Group operates the Companys service stations, which
    include convenience stores or kiosks, and one travel center.
    These operations sell various grades of gasoline, diesel fuel,
    general merchandise, including tobacco and alcoholic and
    nonalcoholic beverages, and food products to the general public
    through retail locations. The Refining Group or Phoenix Fuel
    supplies the petroleum fuels sold by the Retail Group. General
    merchandise and food products are obtained from third party
    suppliers. At December 31, 2002, 2001 and 2000, the Company
    operated 135, 150, and 179 service stations, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Phoenix Fuel:The
    Companys Phoenix Fuel operation is an
    industrial/commercial wholesale petroleum products distribution
    operation, which includes several lubricant and bulk petroleum
    distribution plants, an unmanned fleet fueling
    (cardlock) operation, a bulk lubricant terminal
    facility, and a fleet of finished product and lubricant delivery
    trucks. The petroleum fuels and lubricants sold are primarily
    obtained from third party suppliers and to a lesser extent from
    the Refining Group.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

Other Company operations that are not included in
any of the three segments are included in the category
Other. These operations consist primarily of
corporate staff operations, including selling, general and
administrative (SG&A) expenses.

Operating income for each segment consists of net
revenues less cost of products sold, operating expenses,
depreciation and amortization, and the segments SG&A
expenses. The sales between segments are made at market prices.
Cost of products sold reflects current costs adjusted, where
appropriate, for LIFO and lower of cost or market inventory
adjustments.

The total assets of each segment consist
primarily of net property, plant and equipment, inventories,
accounts receivable and other assets directly associated with
the segments operations. Included in the total assets of
the corporate staff operations are a majority of the
Companys cash and cash equivalents, various accounts
receivable, net property, plant and equipment, and other
long-term assets.

55



---



##### 



Disclosures regarding the Companys
reportable segments with reconciliations to consolidated totals
are presented below.

|                                                        |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |         |        |           | 
|------------------------------------------------------- | ------------------------------------------------------ | ---------------------------------------------- | ------- | ------- | ------- | ------- | ------- | ------- | ------ | ----------- | ------- | ------------ | ----- | ------- | ------ | ------- | ------- | --- | -------- | -------- | ----- | -------- | --------- | ------- | ------ | --------- | 
|                                                        |                                                        |                                               
|                                                        |                                                        | As of and for the Year Ended December 31, 2002
|                                                        |                                                        |                                               
|                                                        |                                                        | Refining                                       |         | Retail  |         | Phoenix |         |         |        | Reconciling |         |             
|                                                        |                                                        | Group                                          |         | Group   |         | Fuel    |         | Other   |        | Items       |         | Consolidated
|                                                        |                                                        |                                                |         |         |         |         |         |         |        |             |         |             
|                                                        |                                                        |                                               
|                                                        |                                                        | (In thousands)                                
|Customer net revenues:                                  |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |        
|                                                        | Finished products:                                     |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |         |       
|                                                        |                                                        | Four Corners operations                        |         | $       | 253,826 |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |         |        |          
|                                                        |                                                        | Yorktown operations(1)                         |         |         | 408,936 |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |         |        |          
|                                                        |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |        
|                                                        |                                                        |                                                | Total   |         | $       | 662,762 |         |         | $      | 189,008     |         |              | $     | 269,316 |        |         | $       |    |          |          | $     |         |           |         | $      | 1,121,086 | 
|                                                        | Merchandise and lubricants                             |                                                |         |        |         |         |         | 141,870 |        |             |         | 23,345       |       |         |        |        |         |     |          |         |       |          |           | 165,215 |       
|                                                        | Other                                                  |                                                |         | 8,226   |         |         |         | 15,791  |        |             |         | 2,564        |       |         |        | 180     |         |     |          |         |       |          |           | 26,761  |       
|                                                        |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |        
|                                                        |                                                        |                                                | Total   |         |         | 670,988 |         |         |        | 346,669     |         |              |       | 295,225 |        |         |         | 180 |          |          |       |         |           |         |        | 1,313,062 | 
|                                                        |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |        
|Intersegment net revenues:                              |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |        
|                                                        | Finished products                                      |                                                |         | 151,189 |         |         |         |        |        |             |         | 54,709       |       |         |        |        |         |     |          | (205,898 | )     |          |           |        |       
|                                                        | Other                                                  |                                                |         | 16,352  |         |         |         |        |        |             |         |             |       |         |        |        |         |     |          | (16,352  | )     |          |           |        |       
|                                                        |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |        
|                                                        |                                                        |                                                | Total   |         |         | 167,541 |         |         |        |            |         |              |       | 54,709  |        |         |         |    |          |          |       | (222,250 | )         |         |        |          | 
|                                                        |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |        
|Total net revenues                                      |                                                        |                                                | 838,529 |         |         |         | 346,669 |         |        |             | 349,934 |              |       |         | 180    |         |         |     | (222,250 | )        |       |          | 1,313,062 |        
|Net revenues of discontinued operations                 |                                                        |                                                |        |         |         |         | 26,010  |         |        |             |        |              |       |         |       |         |         |     |         |          |       |          | 26,010    |        
|                                                        |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |        
|Net revenues of continuing operations                   |                                                        | $                                              | 838,529 |         |         | $       | 320,659 |         |        | $           | 349,934 |              |       | $       | 180    |         |         | $   | (222,250 | )        |       | $        | 1,287,052 |        
|                                                        |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |        
|Operating income (loss):                                |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |        
|                                                        | Four Corners operations                                |                                                | $       | 30,822  |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |         |       
|                                                        | Yorktown operations(1)                                 |                                                |         | (6,388  | )       |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |         |       
|                                                        |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |        
|                                                        |                                                        | Total operating income (loss)                  |         | $       | 24,434  |         |         | $       | 3,249  |             |         | $            | 7,014 |         |        | $       | (16,982 | )   |          | $        | 5,894 |          |           | $       | 23,609 |          
|                                                        | Discontinued operations                                |                                                |         |        |         |         |         | (1,434  | )      |             |         |             |       |         |        |        |         |     |          | 6,010    |       |          |           | 4,576   |       
|                                                        |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |        
|                                                        | Operating income (loss) from continuing
    operations |                                                | $       | 24,434  |         |         | $       | 4,683   |        |             | $       | 7,014        |       |         | $      | (16,982 | )       |     | $        | (116     | )     |          | $         | 19,033  |       
|Interest expense                                        |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          | (36,308   | )      
|Amortization/write-off of financing costs               |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          | (3,256    | )      
|Interest income                                         |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          | 432       |        
|                                                        |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |        
|Loss from continuing operations before income
    taxes |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       | $        | (20,099   | )      
|                                                        |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |        
|Depreciation and amortization:                          |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |        
|                                                        | Four Corners operations                                |                                                | $       | 16,759  |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |         |       
|                                                        | Yorktown operations(1)                                 |                                                |         | 4,493   |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |         |       
|                                                        |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |        
|                                                        |                                                        | Total                                          |         | $       | 21,252  |         |         | $       | 12,540 |             |         | $            | 2,046 |         |        | $       | 1,296   |     |          | $        |      |          |           | $       | 37,134 |          
|                                                        | Discontinued operations                                |                                                |         |        |         |         |         | 1,070   |        |             |         |             |       |         |        |        |         |     |          |         |       |          |           | 1,070   |       
|                                                        |                                                        |                                                |         |         |         |         |         |         |        |             |         |              |       |         |        |         |         |     |          |          |       |          |           |        
|                                                        | Continuing operations                                  |                                                | $       | 21,252  |         |         | $       | 11,470  |        |             | $       | 2,046        |       |         | $      | 1,296   |         |     | $        |         |       |          | $         | 36,064  |       
|Total assets                                            |                                                        | $                                              | 432,655 |         |         | $       | 132,397 |         |        | $           | 66,274  |              |       | $       | 70,960 |         |         | $   |         |          |       | $        | 702,286   |        
|Capital expenditures                                    |                                                        | $                                              | 9,573   |         |         | $       | 1,016   |         |        | $           | 545     |              |       | $       | 1,856  |         |         | $   |         |          |       | $        | 12,990    |        
|Yorktown refinery acquisition                           |                                                        | $                                              | 194,733 |         |         | $       |        |         |        | $           |        |              |       | $       |       |         |         | $   |         |          |       | $        | 194,733   |        



---



|    |                                   
|--- | ----------------------------------
|(1) | Since acquisition on May 14, 2002.

56



---



##### 



|                                                            |                                                        |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |         |         |         | 
|----------------------------------------------------------- | ------------------------------------------------------ | ---------------------------------------------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ----------- | ------- | ------------ | ------- | - | ------- | ------- | --- | - | -------- | -------- | -------- | - | ------- | ------- | ------- | 
|                                                            |                                                        |                                               
|                                                            |                                                        | As of and for the Year Ended December 31, 2001
|                                                            |                                                        |                                               
|                                                            |                                                        | Refining                                       |         | Retail  |         | Phoenix |         |         |         | Reconciling |         |             
|                                                            |                                                        | Group                                          |         | Group   |         | Fuel    |         | Other   |         | Items       |         | Consolidated
|                                                            |                                                        |                                                |         |         |         |         |         |         |         |             |         |             
|                                                            |                                                        |                                               
|                                                            |                                                        | (In thousands)                                
|Customer net revenues:                                      |                                                        |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |         |        
|                                                            | Finished products                                      |                                                | $       | 280,636 |         |         | $       | 228,533 |         |             | $       | 284,430      |         |   | $       |        |     |   | $        |         |          |   | $       | 793,599 |        
|                                                            | Merchandise and lubricants                             |                                                |         |        |         |         |         | 144,531 |         |             |         | 24,555       |         |   |         |        |     |   |          |         |          |   |         | 169,086 |        
|                                                            | Other                                                  |                                                |         | 9,373   |         |         |         | 17,315  |         |             |         | 2,062        |         |   |         | 244     |     |   |          |         |          |   |         | 28,994  |        
|                                                            |                                                        |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |         |        
|                                                            |                                                        | Total                                          |         |         | 290,009 |         |         |         | 390,379 |             |         |              | 311,047 |   |         |         | 244 |   |          |          |         |   |         |         | 991,679 | 
|                                                            |                                                        |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |         |        
|Intersegment net revenues:                                  |                                                        |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |         |        
|                                                            | Finished products                                      |                                                |         | 166,546 |         |         |         |        |         |             |         | 80,125       |         |   |         |        |     |   |          | (246,671 | )        |   |         |        |        
|                                                            | Other                                                  |                                                |         | 16,671  |         |         |         |        |         |             |         |             |         |   |         |        |     |   |          | (16,671  | )        |   |         |        |        
|                                                            |                                                        |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |         |        
|                                                            |                                                        | Total                                          |         |         | 183,217 |         |         |         |        |             |         |              | 80,125  |   |         |         |    |   |          |          | (263,342 | ) |         |         |        | 
|                                                            |                                                        |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |         |        
|Total net revenues                                          |                                                        |                                                | 473,226 |         |         |         | 390,379 |         |         |             | 391,172 |              |         |   | 244     |         |     |   | (263,342 | )        |          |   | 991,679 |        
|Net revenues of discontinued operations                     |                                                        |                                                |        |         |         |         | 40,335  |         |         |             |        |              |         |   |        |         |     |   |         |          |          |   | 40,335  |        
|                                                            |                                                        |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |         |        
|Net revenues of continuing operations                       |                                                        | $                                              | 473,226 |         |         | $       | 350,044 |         |         | $           | 391,172 |              |         | $ | 244     |         |     | $ | (263,342 | )        |          | $ | 951,344 |        
|                                                            |                                                        |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |         |        
|Operating income (loss)                                     |                                                        | $                                              | 66,148  |         |         | $       | 5,214   |         |         | $           | 4,731   |              |         | $ | (21,163 | )       |     | $ | (11,621  | )        |          | $ | 43,309  |        
|                                                            | Discontinued operations                                |                                                |         |        |         |         |         | (563    | )       |             |         |             |         |   |         |        |     |   |          | (80      | )        |   |         | (643    | )      
|                                                            |                                                        |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |         |        
|                                                            | Operating income (loss) from continuing
    operations |                                                | $       | 66,148  |         |         | $       | 5,777   |         |             | $       | 4,731        |         |   | $       | (21,163 | )   |   | $        | (11,541  | )        |   | $       | 43,952  |        
|Interest expense                                            |                                                        |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   | (24,098 | )      
|Amortization/write-off of financing costs                   |                                                        |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   | (764    | )      
|Interest income                                             |                                                        |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   | 1,661   |        
|                                                            |                                                        |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |         |        
|Earnings from continuing operations before income
    taxes |                                                        |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          | $ | 20,751  |        
|                                                            |                                                        |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |         |        
|Depreciation and amortization                               |                                                        | $                                              | 16,463  |         |         | $       | 12,709  |         |         | $           | 2,696   |              |         | $ | 1,243   |         |     | $ |         |          |          | $ | 33,111  |        
|                                                            | Discontinued operations                                |                                                |         |        |         |         |         | 1,254   |         |             |         |             |         |   |         |        |     |   |          |         |          |   |         | 1,254   |        
|                                                            |                                                        |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |         |        
|                                                            | Continuing operations                                  |                                                | $       | 16,463  |         |         | $       | 11,455  |         |             | $       | 2,696        |         |   | $       | 1,243   |     |   | $        |         |          |   | $       | 31,857  |        
|Total assets                                                |                                                        | $                                              | 228,403 |         |         | $       | 165,176 |         |         | $           | 65,539  |              |         | $ | 48,056  |         |     | $ |         |          |          | $ | 507,174 |        
|Capital expenditures                                        |                                                        | $                                              | 13,310  |         |         | $       | 41,337  |         |         | $           | 985     |              |         | $ | 1,424   |         |     | $ |         |          |          | $ | 57,056  |        

57



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##### 



|                                                            |                                                    |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |           |         |           | 
|----------------------------------------------------------- | -------------------------------------------------- | ---------------------------------------------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ----------- | ------- | ------------ | ------- | - | ------- | ------- | --- | - | -------- | -------- | -------- | - | --------- | ------- | --------- | 
|                                                            |                                                    |                                               
|                                                            |                                                    | As of and for the Year Ended December 31, 2000
|                                                            |                                                    |                                               
|                                                            |                                                    | Refining                                       |         | Retail  |         | Phoenix |         |         |         | Reconciling |         |             
|                                                            |                                                    | Group                                          |         | Group   |         | Fuel    |         | Other   |         | Items       |         | Consolidated
|                                                            |                                                    |                                                |         |         |         |         |         |         |         |             |         |             
|                                                            |                                                    |                                               
|                                                            |                                                    | (In thousands)                                
|Customer net revenues:                                      |                                                    |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |           |        
|                                                            | Finished products                                  |                                                | $       | 305,725 |         |         | $       | 267,201 |         |             | $       | 334,122      |         |   | $       |        |     |   | $        |         |          |   | $         | 907,048 |          
|                                                            | Merchandise and lubricants                         |                                                |         |        |         |         |         | 138,543 |         |             |         | 26,662       |         |   |         |        |     |   |          |         |          |   |           | 165,205 |          
|                                                            | Other                                              |                                                |         | 8,957   |         |         |         | 15,595  |         |             |         | 2,188        |         |   |         | 367     |     |   |          |         |          |   |           | 27,107  |          
|                                                            |                                                    |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |           |        
|                                                            |                                                    | Total                                          |         |         | 314,682 |         |         |         | 421,339 |             |         |              | 362,972 |   |         |         | 367 |   |          |          |         |   |           |         | 1,099,360 | 
|                                                            |                                                    |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |           |        
|Intersegment net revenues:                                  |                                                    |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |           |        
|                                                            | Finished products                                  |                                                |         | 212,957 |         |         |         |        |         |             |         | 80,252       |         |   |         |        |     |   |          | (293,209 | )        |   |           |        |          
|                                                            | Other                                              |                                                |         | 15,531  |         |         |         |        |         |             |         |             |         |   |         |        |     |   |          | (15,531  | )        |   |           |        |          
|                                                            |                                                    |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |           |        
|                                                            |                                                    | Total                                          |         |         | 228,488 |         |         |         |        |             |         |              | 80,252  |   |         |         |    |   |          |          | (308,740 | ) |           |         |          | 
|                                                            |                                                    |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |           |        
|Total net revenues                                          |                                                    |                                                | 543,170 |         |         |         | 421,339 |         |         |             | 443,224 |              |         |   | 367     |         |     |   | (308,740 | )        |          |   | 1,099,360 |        
|Net revenues of discontinued operations                     |                                                    |                                                |        |         |         |         | 41,741  |         |         |             |        |              |         |   |        |         |     |   |         |          |          |   | 41,741    |        
|                                                            |                                                    |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |           |        
|Net revenues of continuing operations                       |                                                    | $                                              | 543,170 |         |         | $       | 379,598 |         |         | $           | 443,224 |              |         | $ | 367     |         |     | $ | (308,740 | )        |          | $ | 1,057,619 |        
|                                                            |                                                    |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |           |        
|Operating income (loss)                                     |                                                    | $                                              | 45,661  |         |         | $       | 162     |         |         | $           | 7,260   |              |         | $ | (18,519 | )       |     | $ | 13       |          |          | $ | 34,577    |        
|                                                            | Discontinued operations                            |                                                |         |        |         |         |         | (134    | )       |             |         |             |         |   |         |        |     |   |          |         |          |   |           | (134    | )        
|                                                            |                                                    |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |           |        
|                                                            | Operating income (loss) from continuing operations |                                                | $       | 45,661  |         |         | $       | 296     |         |             | $       | 7,260        |         |   | $       | (18,519 | )   |   | $        | 13       |          |   | $         | 34,711  |          
|Interest expense                                            |                                                    |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   | (24,411   | )      
|Amortization/write-off of financing costs                   |                                                    |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   | (818      | )      
|Interest income                                             |                                                    |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   | 1,989     |        
|                                                            |                                                    |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |           |        
|Earnings from continuing operations before income
    taxes |                                                    |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          | $ | 11,471    |        
|                                                            |                                                    |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |           |        
|Depreciation and amortization                               |                                                    | $                                              | 17,138  |         |         | $       | 11,528  |         |         | $           | 2,554   |              |         | $ | 1,541   |         |     | $ |         |          |          | $ | 32,761    |        
|                                                            | Discontinued operations                            |                                                |         |        |         |         |         | 1,022   |         |             |         |             |         |   |         |        |     |   |          |         |          |   |           | 1,022   |          
|                                                            |                                                    |                                                |         |         |         |         |         |         |         |             |         |              |         |   |         |         |     |   |          |          |          |   |           |        
|                                                            | Continuing operations                              |                                                | $       | 17,138  |         |         | $       | 10,506  |         |             | $       | 2,554        |         |   | $       | 1,541   |     |   | $        |         |          |   | $         | 31,739  |          
|Total assets                                                |                                                    | $                                              | 244,947 |         |         | $       | 148,992 |         |         | $           | 82,084  |              |         | $ | 52,542  |         |     | $ |         |          |          | $ | 528,565   |        
|Capital expenditures                                        |                                                    | $                                              | 6,850   |         |         | $       | 13,470  |         |         | $           | 1,413   |              |         | $ | 722     |         |     | $ |         |          |          | $ | 22,455    |        

Note 3  Goodwill and Other
Intangible Assets

In June 2001, the Company adopted SFAS
No. 141, Business Combinations, which addresses
financial accounting and reporting for goodwill and other
intangible assets acquired in a business combination at
acquisition.

On January 1, 2002, the Company adopted SFAS
No. 142, Goodwill and Other Intangible Assets.
SFAS No. 142 addresses financial accounting and reporting
for intangible assets acquired individually or with a group of
other assets (but not those acquired in a business combination)
at acquisition. This Statement also addresses financial
accounting and reporting for goodwill and other intangible
assets subsequent to their acquisition.

SFAS No. 142, among other things, specifies
that goodwill and certain intangible assets with indefinite
lives no longer be amortized, but instead be subject to periodic
impairment testing. Previously recognized goodwill and certain
intangible assets with indefinite lives were to be initially
tested for impairment as of the beginning of 2002.

In the first quarter of 2002, the Company
determined that there was no impairment to its indefinite lived
intangible assets. These indefinite lived intangible assets will
continue to be evaluated for impairment as required by SFAS
No. 142.

58



---



##### 



As required by SFAS No. 142, the Company
completed the transitional impairment test for goodwill during
the second quarter of 2002. The Company identified four
reporting units for the purpose of this transitional impairment
test. The reporting units consisted of the Four Corners Refinery
Unit, the Retail Unit, the Phoenix Fuel Unit and the Travel
Center Unit. The fair value of each reporting unit, except for
the Travel Center Unit, was determined using a discounted cash
flow model based on assumptions applicable to each reporting
unit. The fair value of the Travel Center Unit was based on
estimated sales price. The fair value of the reporting units
exceeded their respective carrying amounts, including goodwill.
As a result, the goodwill of each reporting unit was considered
not impaired and the second step of the impairment test, to
measure the amount of an impairment loss, was not necessary.

The Company elected to conduct its annual
goodwill impairment test as of the first day of each fourth
fiscal quarter (October 1). The Company identified five
reporting units for the purpose of the annual impairment test.
The reporting units consisted of the four units identified above
plus the Yorktown Refinery Unit. The fair value of each
reporting unit was determined using a discounted cash flow model
based on assumptions applicable to each reporting unit. The fair
value of the reporting units exceeded their respective carrying
amounts, including goodwill. As a result, the goodwill of each
reporting unit was considered not impaired.

In addition to the annual goodwill impairment
test, if events and circumstances indicate that goodwill of a
reporting unit might be impaired, then goodwill also will be
tested for impairment when the impairment indicator arises. At
December 31, 2002 and 2001, the Company had goodwill of
$19,465,000 and $19,815,000, respectively.

The changes in the carrying amount of goodwill
for the year ended December 31, 2002 are as follows:

|                                                                 |  |                |     |        |  |         |       |       |  |   |        |  |  |   |        |  
|---------------------------------------------------------------- |  | -------------- | --- | ------ |  | ------- | ----- | ----- |  | - | ------ |  |  | - | ------ | -
|                                                                 |  | Refining       |     | Retail |  | Phoenix |       |      
|                                                                 |  | Group          |     | Group  |  | Fuel    |       | Total
|                                                                 |  |                |     |        |  |         |       |      
|                                                                 |  |               
|                                                                 |  | (In thousands)
|Balance as of January 1, 2002                                    |  | $              | 125 |        |  | $       | 4,968 |       |  | $ | 14,722 |  |  | $ | 19,815 |  
|Impairment losses related to retail units held
    for use       |  |                |    |        |  |         | (42   | )     |  |   |       |  |  |   | (42    | )
|Goodwill written off related to the sale of ten
    retail units |  |                |    |        |  |         | (308  | )     |  |   |       |  |  |   | (308   | )
|                                                                 |  |                |     |        |  |         |       |       |  |   |        |  |  |   |        |  
|Balance as of December 31, 2002                                  |  | $              | 125 |        |  | $       | 4,618 |       |  | $ | 14,722 |  |  | $ | 19,465 |  
|                                                                 |  |                |     |        |  |         |       |       |  |   |        |  |  |   |        |  

Certain of the Companys retail units
classified as held for sale or held and used are tested for
impairment when circumstances change. In 2002, offers were
received for certain retail units, while others continued to be
marketed for sale, and these units were tested for impairment.
This resulted in goodwill impairment write-downs for three units
of $42,000. Also, goodwill of $308,000 relating to retail units
sold was written off and is included in the net gain on the
disposal of these units reported as a part of discontinued
operations. See Note 5.

Intangible assets with finite lives will continue
to be amortized over their respective useful lives and will be
tested for impairment in accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets.

59



---



##### 



A summary of intangible assets that are included
in Other Assets in the Consolidated Balance Sheet at
December 31, 2002 is presented below:

|                               |                      |                |        |              |  |          |       |       |  |   |       |       | 
|------------------------------ | -------------------- | -------------- | ------ | ------------ |  | -------- | ----- | ----- |  | - | ----- | ----- | 
|                               |                      | Gross          |        |              |  | Net     
|                               |                      | Carrying       |        | Accumulated  |  | Carrying
|                               |                      | Value          |        | Amortization |  | Value   
|                               |                      |                |        |              |  |         
|                               |                      |               
|                               |                      | (In thousands)
|Amortized intangible assets:   |                      |                |        |              |  |          |       |       |  |   |       |      
|                               | Rights-of-way        |                | $      | 3,564        |  |          | $     | 2,376 |  |   | $     | 1,188 | 
|                               | Contracts            |                |        | 3,971        |  |          |       | 3,476 |  |   |       | 495   | 
|                               | Licenses and permits |                |        | 786          |  |          |       | 59    |  |   |       | 727   | 
|                               |                      |                |        |              |  |          |       |       |  |   |       |      
|                               |                      |                | 8,321  |              |  |          | 5,911 |       |  |   | 2,410 |      
|                               |                      |                |        |              |  |          |       |       |  |   |       |      
|Unamortized intangible assets: |                      |                |        |              |  |          |       |       |  |   |       |      
|                               | Liquor licenses      |                |        | 7,409        |  |          |       |      |  |   |       | 7,409 | 
|                               |                      |                |        |              |  |          |       |       |  |   |       |      
|Total intangible assets        |                      | $              | 15,730 |              |  | $        | 5,911 |       |  | $ | 9,819 |      
|                               |                      |                |        |              |  |          |       |       |  |   |       |      

In the second quarter of 2002, the remaining
right-of-way costs relating to certain pipeline assets that had
been sold were written off. These rights-of-way had an original
cost of approximately $21,000 and accumulated amortization of
approximately $6,900.

In the third quarter of 2002, $786,000 of the
purchase price allocation for the Yorktown refinery, relating to
certain licenses and permits, was recorded as amortizable
intangible assets. See the table above and Note 4.

Intangible asset amortization expense for the
year ended December 31, 2002 was $349,000. Estimated
amortization expense for the five succeeding fiscal years is as
follows:

|     |  |                |     | 
|---- |  | -------------- | --- | 
|     |  | (In thousands)
|     |  |               
|2003 |  | $              | 377 | 
|2004 |  |                | 377 | 
|2005 |  |                | 377 | 
|2006 |  |                | 374 | 
|2007 |  |                | 273 | 

The following table sets forth a reconciliation
of net earnings (loss) and earnings (loss) per share
information for the years ended December 31, 2002, 2001 and
2000 adjusted for the non-amortization provisions of SFAS
No. 142.

|                                              |                              |                         |        |       |   |      |        |      |  |   |       |      | 
|--------------------------------------------- | ---------------------------- | ----------------------- | ------ | ----- | - | ---- | ------ | ---- |  | - | ----- | ---- | 
|                                              |                              |                        
|                                              |                              | Year Ended December 31,
|                                              |                              |                        
|                                              |                              | 2002                    |        | 2001  |   | 2000
|                                              |                              |                         |        |       |   |     
|                                              |                              |                        
|                                              |                              | (In thousands)         
|Reported net earnings (loss)                  |                              | $                       | (9,267 | )     |   | $    | 12,381 |      |  | $ | 7,289 |     
|Add: Goodwill amortization, net of tax effect |                              |                         |       |       |   |      | 641    |      |  |   | 641   |     
|                                              |                              |                         |        |       |   |      |        |      |  |   |       |     
|Adjusted net earnings (loss)                  |                              | $                       | (9,267 | )     |   | $    | 13,022 |      |  | $ | 7,930 |     
|                                              |                              |                         |        |       |   |      |        |      |  |   |       |     
|Basic earnings (loss) per share:              |                              |                         |        |       |   |      |        |      |  |   |       |     
|                                              | Reported net earnings (loss) |                         | $      | (1.08 | ) |      | $      | 1.40 |  |   | $     | 0.79 | 
|                                              | Adjusted net earnings (loss) |                         | $      | (1.08 | ) |      | $      | 1.47 |  |   | $     | 0.86 | 
|Diluted earnings (loss) per share:            |                              |                         |        |       |   |      |        |      |  |   |       |     
|                                              | Reported net earnings (loss) |                         | $      | (1.08 | ) |      | $      | 1.39 |  |   | $     | 0.79 | 
|                                              | Adjusted net earnings (loss) |                         | $      | (1.08 | ) |      | $      | 1.46 |  |   | $     | 0.86 | 

60



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##### 



Note 4  Acquisitions

On May 14, 2002, the Company acquired the
61,900 bpd Yorktown refinery from BP Corporation North America
Inc. and BP Products North America Inc. (collectively
BP) for $127,500,000 plus $65,182,000 for the value
of inventory at closing, the assumption of certain liabilities,
and a conditional earn-out. In addition, the Company incurred
direct costs related to this transaction of approximately
$2,000,000.

As part of the Yorktown acquisition, the Company
agreed to pay to BP, beginning in 2003 and concluding at the end
of 2005, earn-out payments up to a maximum of $25,000,000 when
the average monthly spreads for regular reformulated gasoline or
No. 2 distillate over West Texas Intermediate equivalent
light crude oil on the New York Mercantile Exchange exceed $5.50
or $4.00 per barrel, respectively. These earn-out
considerations, if paid, will be considered additional purchase
price and will be allocated to the assets acquired in the same
proportions as the original purchase price was allocated, not to
exceed the estimated current replacement cost, and amortized
over the estimated remaining life of the assets.

The Yorktown acquisition was funded with cash on
hand, $32,000,000 in borrowings under a $100,000,000 senior
secured revolving credit facility, $40,000,000 in borrowings
from a senior secured mortgage loan facility, and part of the
proceeds from the issuance of $200,000,000 of 11% Senior
Subordinated Notes due 2012 (the 11% Notes). In
addition, the Company incurred approximately $17,436,000 of
financing costs in connection with these obligations. See Note
11 for a discussion of the obligations.

Under SFAS No. 141, Business
Combinations, the Yorktown acquisition was accounted for
as a purchase, whereby the purchase price was allocated to the
assets acquired and liabilities assumed based upon their
respective fair market values at the date of acquisition. The
accompanying financial statements reflect the preliminary
purchase price allocation. The Company is in the process of
completing the review and determination of the fair values of
the assets acquired and the liabilities assumed. Accordingly,
the allocation of the purchase price is subject to revision,
which is not expected to be material, based on a final
determination of appraised and other fair values. The
December 31, 2002 financial statements include the results
of operations of the Yorktown acquisition since the date of
acquisition.

The purchase price allocation, including direct
costs incurred in the Yorktown acquisition, is as follows:

|                                                |                                 |                           |         |        |         | 
|----------------------------------------------- | ------------------------------- | ------------------------- | ------- | ------ | ------- | 
|                                                |                                 | (In thousands)           
|Property, plant and equipment                   |                                 | $                         | 141,411 |       
|Other assets                                    |                                 |                           | 786     |       
|Deferred income tax assets, current             |                                 |                           | 6,700   |       
|Inventories:                                    |                                 |                           |         |       
|                                                | Feedstocks and refined products |                           |         | 65,182 |        
|                                                | Materials and supplies          |                           |         | 3,235  |        
|Environmental liabilities assumed               |                                 |                           | (7,500  | )     
|Pension and retiree medical obligations assumed |                                 |                           | (9,403  | )     
|Other obligations assumed                       |                                 |                           | (404    | )     
|Deferred income tax liabilities, non-current    |                                 |                           | (5,274  | )     
|                                                |                                 |                           |         |       
|                                                |                                 | Total cash purchase price |         | $      | 194,733 | 
|                                                |                                 |                           |         |       

The following unaudited pro forma financial
information for the twelve months ended December 31, 2002
and 2001 gives effect to the (i) Yorktown acquisition,
(ii) financing transactions described above, and
(iii) redemption of the Companys $100,000,000 of
9 3/4% Senior Subordinated Notes due 2003 (the
9 3/4% Notes), which occurred on June 28,
2002, as if each had occurred at the beginning of the periods
presented. The pro forma results were determined using estimates
and assumptions, which management believes to be reasonable,
based upon limited available information from BP. This pro forma
information is not necessarily indicative of the results of
future operations.

61



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##### 





|                                    |         |                           |           |       |   |   |           |      | 
|----------------------------------- | ------- | ------------------------- | --------- | ----- | - | - | --------- | ---- | 
|                                    |         |                          
|                                    |         | Year Ended               
|                                    |         | December 31,             
|                                    |         |                          
|                                    |         | 2002                      |           | 2001 
|                                    |         |                           |           |      
|                                    |         |                          
|                                    |         | (In thousands, except per
|                                    |         | share data)              
|Revenues from continuing operations |         | $                         | 1,487,460 |       |   | $ | 1,647,444 |     
|Net earnings (loss)                 |         | $                         | (20,664   | )     |   | $ | 16,881    |     
|Net earnings (loss) per share:      |         |                           |           |       |   |   |           |     
|                                    | Basic   |                           | $         | (2.41 | ) |   | $         | 1.90 | 
|                                    | Diluted |                           | $         | (2.41 | ) |   | $         | 1.90 | 

In December 1998, the Company and FFCA Capital
Holding Corporation (FFCA) completed a
sale-leaseback transaction. Under the terms of the Sale and
Lease Agreement (the Agreement), FFCA purchased 83
service station/convenience stores from the Company for
approximately $51,763,000. The Company in turn leased the 83
service station/convenience stores back from FFCA under an
operating lease arrangement with an initial term of
15 years and three separate options to continue the lease
for successive periods of five years. In the second half of
1999, the Company reacquired 24 of the service
station/convenience stores for approximately $13,711,000, which
was the original selling price of these properties. In the
second quarter of 2001, FFCA approached the Company to determine
whether the Company had any interest in reacquiring the
remaining 59 service station/convenience stores. Subsequently,
in July 2001, the Company repurchased, for cash, the 59 service
station/convenience stores for approximately $38,052,000, which
was the original selling price of these properties, plus closing
costs. Certain deferrals on the Balance Sheet relating to the
sale-leaseback transaction reduced the cost basis of the assets
recorded in Property, Plant and Equipment by
approximately $1,736,000. These deferrals included a deferred
gain on the original sale to FFCA, deferred lease allocations,
and deferred costs associated with the original sale. Lease
expense related to these assets totaled $0 for 2002, $2,610,000
for 2001, and $4,556,000 for 2000. Depreciation expense related
to these same assets totaled $3,983,000 for 2002, $2,937,000 in
2001, and $1,499,000 in 2000.

In October 1995, the Company completed the
purchase of the Bloomfield refinery along with related pipeline
and transportation assets for $55,000,000 from Gary-Williams
Energy Co. and its wholly-owned subsidiary, Bloomfield Refining
Company (BRC). The purchase agreement provided for
potential contingent payments to be made to BRC over
approximately six years from the acquisition date of
approximately $35,000,000, not to exceed a net present value of
$25,000,000 as of October 1995, should certain criteria be met.
These contingent payments were considered to be additional
purchase price and were allocated to the assets acquired in the
same proportions as the original purchase price was allocated,
not to exceed the estimated current replacement cost, and
amortized over the estimated remaining life of the assets. For
2000, the Company accrued $5,200,000 in accordance with the
purchase agreement relating to 2000 operations. This amount was
adjusted downward in 2001 to $5,139,000, which amount was paid.
This payment represented the final amount due under the purchase
agreement.

Note 5  Discontinued Operations,
Assets Held For Sale, and Dispositions

For 2002, the Company sold 11 retail units and
reclassified nine others as assets held for sale. The remaining
assets and results of operations of these 20 retail units are
included in discontinued operations in the accompanying
financial statements. Earnings from discontinued operations
before income taxes of $4,576,000 for the year ended
December 31, 2002 include a gain on the disposal of 11
retail units sold of $6,464,000, which is net of $308,000 of
goodwill write-offs; and impairment write-downs of $448,000,
including $22,000 of goodwill write-offs, on four of the retail
units held for sale.

In addition to the retail units classified as
discontinued operations, the Company recorded pre-tax gains of
$1,401,000 on the sale of other assets in the ordinary course of
business, primarily related to the sale of excess land
associated with certain retail properties and two service
station/convenience stores; losses of $1,274,000 on the
write-down of assets due to impairment, including $20,000 of
goodwill; and losses of $243,000 primarily related to the
retirement or replacement of certain property, plant, and
equipment.

62



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##### 



Included in Other Assets as assets
held for sale in the accompanying Condensed Consolidated Balance
Sheets are the following categories of assets.

|                                                  |                               |                |        |       |  |   |        |        | 
|------------------------------------------------- | ----------------------------- | -------------- | ------ | ----- |  | - | ------ | ------ | 
|                                                  |                               |               
|                                                  |                               | December 31,  
|                                                  |                               |               
|                                                  |                               | 2002           |        | 2001 
|                                                  |                               |                |        |      
|                                                  |                               |               
|                                                  |                               | (In thousands)
|Operating retail units:                           |                               |                |        |       |  |   |        |       
|                                                  | Property, plant and equipment |                | $      | 3,088 |  |   | $      | 14,016 | 
|                                                  | Inventories                   |                |        | 324   |  |   |        | 865    | 
|                                                  |                               |                |        |       |  |   |        |       
|                                                  |                               |                | 3,412  |       |  |   | 14,881 |       
|Vacant land  residential/commercial
    property |                               |                | 6,351  |       |  |   | 5,602  |       
|Closed retail units                               |                               |                | 2,376  |       |  |   | 2,521  |       
|Vacant land  industrial site                     |                               |                | 1,596  |       |  |   | 1,596  |       
|Vacant land  adjacent to retail units            |                               |                | 1,201  |       |  |   | 1,201  |       
|                                                  |                               |                |        |       |  |   |        |       
|                                                  |                               | $              | 14,936 |       |  | $ | 25,801 |       
|                                                  |                               |                |        |       |  |   |        |       

Included in discontinued operations is the
following operating information.

|                       |  |                         |        |      |  |      |        |   |  |   |        |  
|---------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                       |  |                        
|                       |  | Year Ended December 31,
|                       |  |                        
|                       |  | 2002                    |        | 2001 |  | 2000
|                       |  |                         |        |      |  |     
|                       |  |                        
|                       |  | (In thousands)         
|Revenues               |  | $                       | 26,010 |      |  | $    | 40,335 |   |  | $ | 41,741 |  
|Pre-tax operating loss |  | $                       | (1,434 | )    |  | $    | (563   | ) |  | $ | (134   | )

In addition, the Company is in the process of
negotiating a purchase and sale agreement for an approximate
8-acre tract of land in north Scottsdale that includes its
corporate headquarters building. The Company also is negotiating
a lease agreement with the potential buyer to lease back a
portion of the corporate headquarters building. No agreement has
been reached with the potential buyer at this time, and as such,
the Company does not know if or when this transaction will close.

For the year ended December 31, 2001, the
Company recorded a pre-tax loss on the disposal/write-down of
assets of $6,132,000 for continuing operations. This amount
included losses of $609,000 on the sale of assets in the
ordinary course of business, primarily related to the sale of 11
service station/convenience stores; losses of $2,639,000 on the
write-down of assets due to impairment, resulting from the
application of Statement of Financial Accounting Standard
(SFAS) No. 121 due to a strategy to sell
certain service station/convenience stores, some of which were
closed; losses of $592,000 relating to the value of leasehold
improvements included in leased service station/convenience
stores returned to the lessors; and losses of $2,292,000
primarily related to the retirement or replacement of certain
refinery property, plant, and equipment. In addition, an $80,000
impairment write-down was recorded for discontinued operations.

63



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##### 



Note 6  Earnings Per
Share

The following is a reconciliation of the
numerators and denominators of the basic and diluted per share
computations for earnings as required by SFAS No. 128:



| |          
| | ---------
| | Numerator

|                                             |  |                         |         |      |  |      |        |   |  |   |       |  
|-------------------------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------ | - |  | - | ----- | -
|                                             |  |                        
|                                             |  | Year Ended December 31,
|                                             |  |                        
|                                             |  | 2002                    |         | 2001 |  | 2000
|                                             |  |                         |         |      |  |     
|                                             |  |                        
|                                             |  | (In thousands)         
|Earnings (loss) from continuing operations   |  | $                       | (12,013 | )    |  | $    | 12,767 |   |  | $ | 7,369 |  
|Earnings (loss) from discontinued operations |  | $                       | 2,746   |      |  |      | (386   | ) |  |   | (80   | )
|                                             |  |                         |         |      |  |      |        |   |  |   |       |  
|Net earnings (loss)                          |  | $                       | (9,267  | )    |  | $    | 12,381 |   |  | $ | 7,289 |  
|                                             |  |                         |         |      |  |      |        |   |  |   |       |  



| |            
| | -----------
| | Denominator

|                                                  |  |                         |           |      |  |      |           |  |  |  |           | 
|------------------------------------------------- |  | ----------------------- | --------- | ---- |  | ---- | --------- |  |  |  | --------- | 
|                                                  |  |                        
|                                                  |  | Year Ended December 31,
|                                                  |  |                        
|                                                  |  | 2002                    |           | 2001 |  | 2000
|                                                  |  |                         |           |      |  |     
|                                                  |  |                        
|                                                  |  | (In thousands)         
|Basic  weighted average shares
    outstanding   |  |                         | 8,565,992 |      |  |      | 8,871,006 |  |  |  | 9,214,470 | 
|Effect of dilutive stock options                  |  |                         |          | *    |  |      | 14,128    |  |  |  | 8,950     | 
|                                                  |  |                         |           |      |  |      |           |  |  |  |           | 
|Diluted  weighted average shares
    outstanding |  |                         | 8,565,992 |      |  |      | 8,885,134 |  |  |  | 9,223,420 | 
|                                                  |  |                         |           |      |  |      |           |  |  |  |           | 



---



|  |                                                                     
|- | --------------------------------------------------------------------
|* | The additional shares would be antidilutive due
    to the net loss.



| |                         
| | ------------------------
| | Basic Earnings Per Share

|                                             |  |                         |       |      |  |      |       |   |  |   |       |  
|-------------------------------------------- |  | ----------------------- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                             |  |                        
|                                             |  | Year Ended December 31,
|                                             |  |                        
|                                             |  | 2002                    |       | 2001 |  | 2000
|                                             |  |                         |       |      |  |     
|                                             |  |                        
|                                             |  | (In thousands)         
|Earnings (loss) from continuing operations   |  | $                       | (1.40 | )    |  | $    | 1.44  |   |  | $ | 0.80  |  
|Earnings (loss) from discontinued operations |  | $                       | 0.32  |      |  |      | (0.04 | ) |  |   | (0.01 | )
|                                             |  |                         |       |      |  |      |       |   |  |   |       |  
|Net earnings (loss)                          |  | $                       | (1.08 | )    |  | $    | 1.40  |   |  | $ | 0.79  |  
|                                             |  |                         |       |      |  |      |       |   |  |   |       |  



| |                           
| | --------------------------
| | Diluted Earnings Per Share

|                                             |  |                         |       |      |  |      |       |   |  |   |       |  
|-------------------------------------------- |  | ----------------------- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                             |  |                        
|                                             |  | Year Ended December 31,
|                                             |  |                        
|                                             |  | 2002                    |       | 2001 |  | 2000
|                                             |  |                         |       |      |  |     
|                                             |  |                        
|                                             |  | (In thousands)         
|Earnings (loss) from continuing operations   |  | $                       | (1.40 | )    |  | $    | 1.43  |   |  | $ | 0.80  |  
|Earnings (loss) from discontinued operations |  | $                       | 0.32  |      |  |      | (0.04 | ) |  |   | (0.01 | )
|                                             |  |                         |       |      |  |      |       |   |  |   |       |  
|Net earnings (loss)                          |  | $                       | (1.08 | )    |  | $    | 1.39  |   |  | $ | 0.79  |  
|                                             |  |                         |       |      |  |      |       |   |  |   |       |  

At December 31, 2002 and 2001, there were
8,571,779 and 8,553,879 shares, respectively, of the
Companys common stock outstanding.

For the year ended December 31, 2002, the
Company will make a discretionary contribution of newly issued
shares of its common stock to its 401(k) plan. See
Note 14 for a description of the 401(k) plan.

There were no transactions subsequent to
December 31, 2002, that if the transactions had occurred
before December 31, 2002, would materially change the
number of common shares or potential common shares outstanding
as of December 31, 2002.

64



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##### 



Note 7  Related Party
Transactions

In the past, the Company engaged in a number of
transactions with related parties, primarily James E. Acridge,
the Companys former Chairman, President and Chief
Executive Officer (the Former CEO). Certain of these
transactions are summarized in the table below.

|                                                                   |  |                                     |           |      |  |      |           |   |  |   |           | 
|------------------------------------------------------------------ |  | ----------------------------------- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | 
|                                                                   |  |                                    
|                                                                   |  | Material Related Party Transactions
|                                                                   |  |                                    
|Transaction                                                        |  | 2002                                |           | 2001 |  | 2000
|                                                                   |  |                                     |           |      |  |     
|Purchase of Jomax Real Property(1)                                 |  |                                     | N/A       |      |  | $    | 5,000,000 |   |  |   | N/A       | 
|Purchase of Jomax Rights(2)                                        |  |                                     | N/A       |      |  | $    | 600,000   |   |  |   | N/A       | 
|Purchase of Artwork for Corporate Headquarters(3)                  |  |                                     | N/A       |      |  | $    | 162,550   |   |  | $ | 450,000   | 
|Purchase of Stock(4)                                               |  |                                     | N/A       |      |  | $    | 3,520,000 |   |  | $ | 896,887   | 
|Principal Amount of Loan Receivable at the end of
    each year(5) |  | $                                   | 5,000,000 |      |  | $    | 5,000,000 |   |  | $ | 5,000,000 | 
|Interest Income on Loan(5)                                         |  | $                                   | 0         |      |  | $    | 537,499   |   |  | $ | 538,954   | 
|Interest Receivable at 12/31(5)                                    |  | $                                   | 402,226   |      |  | $    | 394,384   |   |  | $ | 809,893   | 
|Other Receivables at 12/31(6)                                      |  | $                                   | 90,826    |      |  | $    | 88,338    |   |  | $ | 119,573   | 
|Other Amounts Classified as Compensation(7)                        |  |                                     | N/A       |      |  | $    | 696,204   |   |  |   | N/A       | 
|Other (Receipts) Payments(8)                                       |  |                                     | N/A       |      |  | $    | (39,440   | ) |  | $ | 23,153    | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On January 25, 2001, the Board accepted an
    offer from the Former CEO, on behalf of a trust of which the
    Former CEO is the beneficiary (the Trust), to sell a
    parcel of land (the Jomax Property) to the Company,
    or to a company affiliated with the Company, for the lesser of
    $5,000,000 or the Jomax Propertys appraisal value. In
    March 2001, the Jomax Property was sold to the Company for
    $5,000,000. A portion of the proceeds from the sale were used to
    pay all interest due and payable as of March 28, 2001 under
    the terms of the Companys outstanding loan to the Former
    CEO. As part of the transaction, the Trust also was granted an
    option, exercisable for a period of two years, to repurchase the
    property at the greater of the amount paid by the Company to
    purchase the property and the propertys appraised value,
    and a right of first refusal, exercisable for a period of two
    years, to repurchase the property on the same terms as contained
    in a bona fide offer from a bona fide purchaser.                                                                                                                                                                                                                  
|   
|(2) | On September 20, 2001, the Board directed
    the Company to purchase the Trusts option and right of
    first refusal (collectively, the Rights) for
    $600,000, and the Rights were subsequently sold to the Company
    for this price. At the time of the sale, the Company was
    negotiating with a potential purchaser for the sale of the Jomax
    Property for a price in excess of the Companys purchase
    price. The potential purchaser was requiring the Company to
    represent in the purchase and sale agreement that there were no
    effective options to purchase, or rights of first refusal,
    affecting the property. The Companys purchase of the
    Rights would have enabled the Company to make this
    representation and would have avoided any other complications
    associated with the Rights that potentially could have affected
    the sale. The potential purchaser subsequently advised the
    Company that it was discontinuing negotiations regarding the
    possible sale because general market and economic conditions,
    coupled with the financial uncertainties arising out of the
    events that occurred on September 11, 2001, had severely
    depressed the real estate market. The Company continues to
    market this property for sale.
|   
|(3) | In August 2000, the Board approved the purchase
    of certain artwork from the Former CEO for display in the
    Companys headquarters building. The artwork was purchased
    at its appraised fair market value of approximately $450,000.
    The proceeds of that transaction were used by the Former CEO to
    pay balances due on certain amounts owed to Giant Arizona by the
    Former CEO and by entities controlled, or previously controlled,
    by the Former CEO. In the first quarter of 2001, the Board
    approved the purchase of up to $165,000 worth of additional
    artwork from the Former CEO for display in the Companys
    headquarters building. The artwork was purchased for its
    appraised value of $162,550. The proceeds of that transaction
    were used by the Former CEO to pay balances due on certain
    amounts owed to Giant Arizona by the Former CEO and by entities
    controlled, or previously controlled, by the Former CEO.                                                                                                                                                                                                                                                                                                                              

65



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##### 





|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | During 2000, the Company repurchased 129,466
    shares of its common stock from the Former CEO for $896,887 or
    $7.00 per share for 99,466 shares and $6.6875 per share for
    30,000 shares. The per share price paid for the shares was the
    low price reported for the Companys common stock on the
    New York Stock Exchange on the dates the purchases were made.
    During 2001, the Board directed the Company to repurchase
    400,000 shares of its common stock from the Former CEO for
    $3,520,000 or $8.80 per share. This was the closing price of the
    Companys common stock on the New York Stock Exchange on
    the date that the conditions to purchase set by the Board were
    satisfied, including the receipt of necessary bank waivers and
    consents. The Board directed the Company to purchase all of
    these shares under the Companys stock repurchase program,
    and all of the repurchased shares are treated as treasury shares.
|   
|(5) | The Company loaned $4,000,000 to the Former CEO
    on September 17, 1998 (the Loan). The Loan was
    originally evidenced by an unsecured promissory note bearing
    interest at the prime rate published by the Wall Street Journal
    on September 17, 1998 (the Prime Rate) plus 2%.
    Principal and accrued interest were due and payable in one lump
    sum on February 28, 1999. On December 23, 1998, the
    Company and the Former CEO entered into a revised loan
    agreement. The amount of the Loan was increased to $5,000,000,
    the Loans interest rate was increased to the Prime Rate
    plus 3%, and the Loans maturity date was extended to
    February 28, 2001. An initial interest payment was made on
    February 28, 1999 for interest due through
    December 31, 1998. Subsequent interest was due and payable
    semi-annually on June 30 and December 31 of each year.                                                                   



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Loan was modified again on March 10,
    2000. The terms of the Loan were revised so that all principal
    and interest, including interest that otherwise would have been
    payable on December 31, 1999, became due and payable on
    February 28, 2001. As security for the modified loan, the
    Company received a pledge by a limited liability company owned
    by the Former CEO (Pinnacle Rodeo) of a 49% equity
    interest in another limited liability company (Pinnacle
    Rawhide). The Company believes that Pinnacle Rodeos
    principal asset is full ownership of Pinnacle Rawhide, and that
    Pinnacle Rawhides principal asset was certain real
    property in north Scottsdale, Arizona, on which the Rawhide Wild
    West Town is located, which was subject to secured liens (the
    Real Property). The loan was further modified on
    February 28, 2001 to extend the Loans maturity date
    to March 28, 2001. This modification reflected the fact
    that the Companys purchase of the Jomax Property had not
    closed. A portion of the proceeds of this sale was used to pay
    the interest that became due and payable under the Loan on
    February 28, 2001. On March 21, 2001, the Board
    approved an additional two-year extension of the Loans
    maturity date, making all principal and interest due and payable
    on March 28, 2003. This extension was conditioned upon,
    among other things, the Former CEOs payment of all
    interest due and payable on March 28, 2001, which was paid.
    In return for the extension of the Loan, the Former CEO provided
    additional security for the Loan by pledging all of his equity
    interest in Pinnacle Rodeo.
|
| | On July 18, 2001, the Board was advised that
    Pinnacle Rodeo was unable to make the monthly payment due and
    owing in the month of July under certain loans entered into by
    Pinnacle Rodeo (the Rodeo Loans). The Board was
    asked to make this payment, in the amount of $240,833, on behalf
    of the Former CEO for the benefit of Pinnacle Rodeo. It was the
    Boards understanding that the Rodeo Loans were secured by
    prior liens on the Real Property. The Board authorized the
    Company to make the July payment in order to avoid a default
    under the Rodeo Loans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | As of December 31, 2001, the Company
    established a reserve for the entire amount of the Loan plus
    interest accrued through December 31, 2001. Subsequently,
    the Former CEO personally, and three entities controlled, or
    previously controlled, by the Former CEO, commenced
    Chapter 11 Bankruptcy proceedings, including Pinnacle Rodeo
    and Pinnacle Rawhide. The four bankruptcy cases are jointly
    administered. It is unknown whether and to what extent
    creditors, including the Company, will receive any recovery on
    their respective debts from any of the four bankruptcy estates.
    In the course of the bankruptcy proceeding, the bankruptcy court
    permitted the principal lienholder on the Real Property to take
    back title to the property. In view of this development, the
    Company has continued to maintain the reserve established as of
    December 31, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) | Total includes amounts due from entities
    controlled, or previously controlled, by the Former CEO for
    rent, landscaping, and fuel purchases. Because of the bankruptcy
    proceedings discussed above, a reserve for these receivables has
    been recorded as of December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(7) | In the third quarter of 2001, the Board directed
    the transfer to the Former CEO of a life insurance policy on his
    life with a cash surrender value of $251,078. This policy and
    life insurance policies for another executive had been issued
    prior to the Companys going public in 1989. In connection
    with its determination that the policy should be transferred to
    the Former CEO, the Board considered historical information and
    other relevant matters relating to the policy, including the
    fact that several life insurance policies on the other
    executives life had previously been transferred to that
    executive. The cash value of the life insurance policy was
    considered compensation to the Former CEO for tax purposes in
    2001. The $251,078 cash surrender value recorded on the
    Companys books was expensed by the Company in the third
    quarter and was included in selling, general and administrative
    expenses (SG&A).



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In the third quarter of 2001, the Former CEO also
    submitted statements to the Company for reimbursement of certain
    expenditures made by the Former CEO in the current year and
    prior years. In August 2001, the Company reimbursed the Former
    CEO $228,379 in connection with such statements. Of this amount,
    $204,293 was considered compensation to the Former CEO for tax
    purposes in 2001. The $204,293 was expensed by the Company in
    the third quarter and was included in SG&A.
|
| | In addition, the payment of $240,833 described in
    footnote five above made on behalf of the Former CEO also was
    expensed by the Company in the third quarter of 2001. This
    amount was considered compensation to the Former CEO for tax
    purposes in 2001 and was included in SG&A.                                                                                                                                                                                                                 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(8) | The total represents the net amount of
    (i) certain miscellaneous amounts paid by the Company to
    the Former CEO or entities controlled, or previously controlled,
    by the Former CEO, including certain amounts for joint marketing
    programs, the lease of certain real property for one of the
    Companys service stations, and the assumption by the
    Company of a lease, and (ii) certain miscellaneous amounts
    paid by, or due from, the Former CEO or entities controlled, or
    previously controlled, by the Former CEO, including rent for
    office space in the Companys headquarters building.

Excluded from the above table are a number of
immaterial transactions involving the Company and the Former CEO
or entities controlled, or previously controlled, by the Former
CEO, including: (i) amounts paid to the Company for
purchases of fuel, (ii) payments made to entities
controlled, or previously controlled, by the Former CEO for
events held at facilities owned by such entities,
(iii) reimbursements for certain landscaping and
maintenance services provided for the Former CEO and entities
controlled, or previously controlled, by the Former CEO, and
(iv) the value of products and services provided to the
Company by the Former CEO or entities controlled, or previously
controlled, by him. Various immaterial amounts involving other
related parties are also excluded from the table. Additionally,
in 2002, the Company extended the period of time that the Former
CEO had to exercise 55,800 stock option grants for one year.
These stock options were due to expire on June 27, 2002 due
to the Former CEOs termination on March 29, 2002.
Because the extension changed the terms of the original stock
option grant under the Companys 1998 Stock Incentive Plan,
the Company was required to record compensation expense in the
amount of $79,500.

All of the material foregoing transactions were
reviewed and approved by the Board or committees of the Board.

As previously discussed, the Former CEO, and
three entities controlled by the Former CEO have commenced
Chapter 11 bankruptcy proceedings. The Company is pursuing
claims in the bankruptcy proceedings for, among other things,
the following: (i) the loan and related accrued interest
discussed above, (ii) the other receivables outstanding as
of December 31, 2002 discussed above,
(iii) approximately $515,445 of costs incurred through
December 31, 2002 in connection with resolving a lease
dispute and related litigation in which an entity controlled by
the Former CEO is a sublessee of the Company and a limited
liability company in which the bankruptcy estate of an entity
controlled by Mr. Acridge owns a 51% interest is the
Landlord (costs incurred subsequent to December 31, 2002
also will be pursued), (iv) approximately $124,000 for the
time spent by an employee of the Company on projects for
entities controlled, or previously controlled, by the Former
CEO,(v) approximately $89,000 for landscaping
services provided by employees of

67



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the Company that benefited the Former CEO,
(vi) approximately $15,600 for what the Company believes
are non-Company expenses incurred by the Former CEO on a Company
credit card, and (vii) approximately $1,400 of other
miscellaneous amounts. It is unknown whether, and to what
extent, creditors, including the Company, will receive any
recovery on their respective debts from any of the four
bankruptcy estates.


Note 8  Inventories

Inventories consist of the following:

|                                                      |                            |                |        |        |         |  |        |        |        | 
|----------------------------------------------------- | -------------------------- | -------------- | ------ | ------ | ------- |  | ------ | ------ | ------ | 
|                                                      |                            |               
|                                                      |                            | December 31,  
|                                                      |                            |               
|                                                      |                            | 2002           |        | 2001  
|                                                      |                            |                |        |       
|                                                      |                            |               
|                                                      |                            | (In thousands)
|First-in, first-out (FIFO) method:                  |                            |                |        |        |         |  |        |       
|                                                      | Crude oil                  |                | $      | 34,192 |         |  | $      | 12,835 |       
|                                                      | Refined products           |                |        | 59,896 |         |  |        | 21,982 |       
|                                                      | Refinery and shop supplies |                |        | 11,362 |         |  |        | 8,111  |       
|                                                      | Merchandise                |                |        | 3,374  |         |  |        | 3,928  |       
|Retail method:                                        |                            |                |        |        |         |  |        |       
|                                                      | Merchandise                |                |        | 8,834  |         |  |        | 8,314  |       
|                                                      |                            |                |        |        |         |  |        |       
|                                                      |                            | Subtotal       |        |        | 117,658 |  |        |        | 55,170 | 
|Adjustment for last-in, first-out
    (LIFO) method |                            |                | (9,641 | )      |         |  | 5,996  |       
|Allowance for lower of cost or market                 |                            |                |       |        |         |  | (3,302 | )     
|                                                      |                            |                |        |        |         |  |        |       
|                                                      |                            | Total          |        | $      | 108,017 |  |        | $      | 57,864 | 
|                                                      |                            |                |        |        |         |  |        |       

The portion of inventories valued on a LIFO basis
totaled $70,329,000 and $30,872,000 at December 31, 2002
and 2001, respectively. The data in the following paragraph will
facilitate comparison with the operating results of companies
using the FIFO method of inventory valuation.

If inventories had been determined using the FIFO
method at December 31, 2002, 2001 and 2000, net earnings
and diluted earnings per share for the years ended
December 31, 2002, 2001 and 2000 would have been higher
(lower) by $7,401,000 and $0.86, $(6,981,000) and $(0.79),
and $2,935,000 and $0.32, respectively.

For the year 2002, certain lower cost refinery
LIFO inventory layers were liquidated resulting in a decrease in
the 2002 net loss of approximately $660,000 or $0.08 per share.

In 2001, cost of products sold were increased by
approximately $3,302,000 as a result of a reduction in the
carrying value of inventories related to a decline in crude oil
and refined product prices.

For the year 2001, certain lower cost refinery
LIFO inventory layers were liquidated resulting in an increase
in 2001 earnings of approximately $139,000 or $0.02 per share.

For the year 2000, certain lower cost Phoenix
Fuel LIFO inventory layers were liquidated resulting in an
increase in 2000 earnings of approximately $1,042,000 or $0.11
per share.

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Note 9  Property, Plant and
Equipment

Property, plant and equipment, at cost, consist
of the following:

|                                          |          |                |          |         |  |   |          |         | 
|----------------------------------------- | -------- | -------------- | -------- | ------- |  | - | -------- | ------- | 
|                                          |          |               
|                                          |          | December 31,  
|                                          |          |               
|                                          |          | 2002           |          | 2001   
|                                          |          |                |          |        
|                                          |          |               
|                                          |          | (In thousands)
|Land and improvements                     |          | $              | 40,444   |         |  | $ | 33,677   |        
|Buildings and improvements                |          |                | 128,921  |         |  |   | 127,690  |        
|Machinery and equipment                   |          |                | 426,840  |         |  |   | 287,579  |        
|Pipelines                                 |          |                | 10,456   |         |  |   | 11,560   |        
|Furniture and fixtures                    |          |                | 27,994   |         |  |   | 28,202   |        
|Vehicles                                  |          |                | 8,149    |         |  |   | 7,874    |        
|Construction in progress                  |          |                | 7,057    |         |  |   | 10,136   |        
|                                          |          |                |          |         |  |   |          |        
|                                          | Subtotal |                |          | 649,861 |  |   |          | 506,718 | 
|Accumulated depreciation and amortization |          |                | (225,629 | )       |  |   | (197,212 | )      
|                                          |          |                |          |         |  |   |          |        
|                                          | Total    |                | $        | 424,232 |  |   | $        | 309,506 | 
|                                          |          |                |          |         |  |   |          |        

Note 10  Accrued Expenses

Accrued expenses are comprised of the following:

|                                           |       |                |        |        |  |   |        |        | 
|------------------------------------------ | ----- | -------------- | ------ | ------ |  | - | ------ | ------ | 
|                                           |       |               
|                                           |       | December 31,  
|                                           |       |               
|                                           |       | 2002           |        | 2001  
|                                           |       |                |        |       
|                                           |       |               
|                                           |       | (In thousands)
|Excise taxes                               |       | $              | 16,130 |        |  | $ | 12,200 |       
|Payroll and related costs                  |       |                | 8,523  |        |  |   | 6,941  |       
|Bonus, profit sharing and retirement plans |       |                | 3,632  |        |  |   | 6,566  |       
|Interest                                   |       |                | 7,359  |        |  |   | 5,681  |       
|Other                                      |       |                | 7,174  |        |  |   | 5,149  |       
|                                           |       |                |        |        |  |   |        |       
|                                           | Total |                | $      | 42,818 |  |   | $      | 36,537 | 
|                                           |       |                |        |        |  |   |        |       

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Note 11  Long-Term Debt

Long-term debt consists of the following:

|                                                                                                                    |          |                |         |         |  |   |         |         | 
|------------------------------------------------------------------------------------------------------------------- | -------- | -------------- | ------- | ------- |  | - | ------- | ------- | 
|                                                                                                                    |          |               
|                                                                                                                    |          | December 31,  
|                                                                                                                    |          |               
|                                                                                                                    |          | 2002           |         | 2001   
|                                                                                                                    |          |                |         |        
|                                                                                                                    |          |               
|                                                                                                                    |          | (In thousands)
|11% senior subordinated notes, due 2012, net of
    unamortized discount of $5,651, interest payable semi-annually  |          | $              | 194,349 |         |  | $ |        |        
|9% senior subordinated notes, due 2007, interest
    payable semi-annually                                          |          |                | 150,000 |         |  |   | 150,000 |        
|9 3/4% senior subordinated notes, due 2003,
    interest payable semi-annually                                      |          |                |        |         |  |   | 100,000 |        
|Senior secured revolving credit facility, due
    2005, floating interest rate, interest payable monthly            |          |                | 25,000  |         |  |   |        |        
|Senior secured mortgage loan facility, due 2005,
    floating interest rate, principal and interest payable monthly |          |                | 32,222  |         |  |   |        |        
|Capital lease obligations, 11.3%, due through
    2007, interest payable monthly                                    |          |                | 6,703   |         |  |   | 6,703   |        
|Other                                                                                                               |          |                | 46      |         |  |   | 91      |        
|                                                                                                                    |          |                |         |         |  |   |         |        
|                                                                                                                    | Subtotal |                |         | 408,320 |  |   |         | 256,794 | 
|Less current portion                                                                                                |          |                | (10,251 | )       |  |   | (45     | )      
|                                                                                                                    |          |                |         |         |  |   |         |        
|                                                                                                                    | Total    |                | $       | 398,069 |  |   | $       | 256,749 | 
|                                                                                                                    |          |                |         |         |  |   |         |        

On May 14, 2002, in conjunction with the
Yorktown acquisition, the Company issued $200,000,000 in
aggregate principal amount of outstanding notes in a private
placement under Rule 144A under the Securities Act. The 11%
Notes were issued at a discount of $5,856,000 to effectively
yield 11 1/2%. The proceeds from the sale of the 11% Notes,
together with cash on hand and initial borrowings under the
Companys new senior secured credit facilities, were used
to fund the acquisition of the Yorktown refinery and associated
inventory, to redeem all $100,000,000 of the Companys
9 3/4% Notes due 2003 (the 9 3/4% Notes),
and to pay related transaction fees and expenses. The 11% Notes
mature on May 15, 2012, with interest payable semi-annually
on May 15 and November 15 of each year.

In accordance with a Registration Rights
Agreement entered into in connection with the sale of the
11% Notes, the Company filed a registration statement with
the Securities and Exchange Commission enabling the holders of
the 11% Notes to exchange the 11% Notes for publicly registered
exchange notes with substantially identical terms as the 11%
Notes. All of the original 11% Notes were exchanged and the
exchange offering was completed on September 10, 2002.

On June 28, 2002, the Company redeemed all
of the 9 3/4% Notes at par plus accrued interest. To permit
this redemption, the Company obtained a consent from the holders
of the $150,000,000 of 9% Notes due 2007 (the 9%
Notes) at a cost of approximately $1,200,000.

Covenants associated with the 11% Notes and the
9% Notes currently restrict the Companys ability to incur
additional indebtedness, other than under its credit facility,
pay dividends, and purchase the Companys common stock.

Repayment of the Notes is jointly and severally
guaranteed on an unconditional basis by the Companys
direct and indirect wholly-owned subsidiaries, subject to a
limitation designed to ensure that such guarantees do not
constitute a fraudulent conveyance. Except as otherwise
specified in the indentures pursuant to which the Notes were
issued, there are no restrictions on the ability of such
subsidiaries to transfer funds to the Company in the form of
cash dividends, loans or advances. General provisions of
applicable state law, however, may limit the ability of any
subsidiary to pay dividends or make distributions to the Company
in certain circumstances.

Separate financial statements of the
Companys subsidiaries are not included herein because the
aggregate assets, liabilities, earnings, and equity of the
subsidiaries are substantially equivalent to the assets,

70



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liabilities, earnings, and equity of the Company
on a consolidated basis; the subsidiaries are jointly and
severally liable for the repayment of the Notes; and the
separate financial statements and other disclosures concerning
the subsidiaries are not deemed by the Company to be material to
investors.


In connection with the Yorktown acquisition, the
Company also entered into a $100,000,000, three-year senior
secured revolving credit facility (the Credit
Facility) with a group of banks. The Credit Facility is
due and payable in full on May 13, 2005.

On October 28, 2002, the Company and its
lenders entered into an Amendment to the Credit Facility. The
Amendment modifies certain of the financial covenants to
reflect, in large part, the low refining margin environment that
persisted throughout the industry for most of 2002 and because
at September 30, 2002, the Company was out of compliance
with the minimum consolidated tangible net worth covenant and
total leverage ratio set forth in the Credit Facility. Under the
Amendment, the lenders agreed to forbear from exercising their
rights and remedies under the Credit Facility until certain
conditions were met. Those conditions were satisfied, and the
events of default were waived for the quarter ended
September 30, 2002.

Prior to the Amendment, obligations under the
Credit Facility were guaranteed by each of the Companys
principal subsidiaries and secured by a security interest in the
personal property of the Company and the personal property of
the Companys subsidiaries, including accounts receivable,
inventory, contracts, chattel paper, trademarks, copyrights,
patents, license rights, deposit and investment accounts and
general intangibles, but excluding most fixed assets.

Pursuant to the Amendment, the Company provided
additional collateral to the lenders in the form of first
priority liens on the Bloomfield and Ciniza refineries,
including the land, improvements, equipment and fixtures related
to the refineries; certain identified New Mexico service
station/convenience stores; the stock of the Companys
various direct and indirect subsidiaries; and all proceeds and
products of this additional collateral. The Company paid all
costs of providing this additional collateral, including legal
fees, fees for surveys and title reports, and recording and
filing fees. The lenders under the Loan Facility are entitled to
participate with the lenders under the Credit Facility in the
additional collateral pro rata based on the obligations owed by
the Company under the Credit Facility and the Loan Facility.

The Amendment also, among other things:
(a) increased the interest rate spread under the Credit
Facility to 3.75% from 2.75%, (b) increased the available
letter of credit commitment from $25,000,000 to $50,000,000,
(c) amended the fixed charge coverage ratio, the total
leverage ratio, and the minimum consolidated tangible net worth
covenant, (d) added a new covenant respecting minimum
quarterly consolidated EBITDA, (e) requires the Company to
prepay the outstanding principal amount of the revolver by
$15,000,000 from the proceeds of asset sales occurring between
October 1, 2002 and June 30, 2003, (f) requires
the Company to provide monthly financial statements by region to
the lenders, and (g) limits capital expenditures through
2003. The Company paid the lenders a fee of $250,000 for the
Amendment.

The Credit Facility is primarily a working
capital and letter of credit facility. The availability of funds
under this facility is the lesser of (i) $100,000,000, or
(ii) the amount determined under a borrowing base
calculation tied to the eligible accounts receivable and
inventories. At December 31, 2002 the availability of funds
under the Credit Facility was $100,000,000. There were
$25,000,000 in direct borrowings outstanding under this facility
at December 31, 2002, and there were approximately
$41,193,000 of irrevocable letters of credit outstanding,
primarily to crude oil suppliers, insurance companies and
regulatory agencies.

The interest rate applicable to the Credit
Facility is tied to various short-term indices. At
December 31, 2002, the weighted average rate was
approximately 5.9% per annum. The Company is required to pay a
quarterly commitment fee of 0.50% per annum of the unused amount
of the facility.

The Credit Facility contains negative covenants
limiting, among other things, the Companys ability, and
the ability of the Companys subsidiaries, to incur
additional indebtedness; create liens; dispose of assets;
consolidate or merge; make loans and investments; enter into
transactions with affiliates; use loan proceeds for certain
purposes; guarantee obligations and incur contingent
obligations; enter into agreements restricting the ability of
subsidiaries to pay dividends to the Company; make distributions
or stock repurchases; make significant changes in accounting
practices or change the Companys fiscal year; and except
on terms

71



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acceptable to the senior secured lenders, to
prepay or modify subordinated indebtedness. As discussed above,
the Amendment modified certain of these covenants and imposed
certain additional covenants.


The Credit Facility also requires the Company to
maintain certain financial ratios, each calculated on a pro
forma basis for the Yorktown acquisition, including maintaining
a minimum consolidated tangible net worth, a minimum fixed
charge coverage ratio, a total leverage ratio, and a senior
leverage ratio of consolidated senior indebtedness to
consolidated Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA). As discussed above, the
Amendment also modified certain of these financial covenants and
imposed certain additional financial covenants.

The Companys failure to satisfy any of
these covenants is an event of default under the Credit
Facility. The Credit Facility also includes other customary
events of default, including, among other things, a
cross-default to the Companys other material indebtedness
and certain changes of control.

In connection with the Yorktown acquisition, the
Company also entered into a $40,000,000 three-year senior
secured mortgage loan facility (the Loan Facility)
with a group of financial institutions.

On October 28, 2002, the Company and its
lenders also entered into an Amendment to the Loan Facility and
the related Parent Guaranty. At September 30, 2002, the
Company was out of compliance with the minimum consolidated
tangible net worth covenant and the total leverage ratio
provisions of the Parent Guaranty. As discussed above, the
events of default were waived for the quarter ended
September 30, 2002. The Loan Amendment generally tracked
the major changes effected by the Amendment to the Credit
Facility. The Company paid the lenders a fee of approximately
$86,000 for the Loan Amendment.

Prior to the Loan Amendment, the loan was secured
by the Yorktown refinery property, fixtures and equipment,
excluding inventory, accounts receivable and other Yorktown
refinery assets securing the Credit Facility. The Company and
its principal subsidiaries also guaranteed the loan. Pursuant to
the Loan Amendment, the Company granted the lenders the same
additional collateral as described above in connection with the
Amendment to the credit facility.

The Company issued notes to the lenders, which
bear interest at a rate that is tied to various short-term
indices. At December 31, 2002, this rate was approximately
6.9% per annum. The remainder of the notes fully amortize during
the remaining term as follows: 2003  $10,222,000,
2004  $11,111,000, and 2005  $10,889,000.

The Loan Facility contains negative covenants
limiting the Companys ability and the ability of the
Companys subsidiaries to, among other things, incur debt;
create liens; dispose of assets; consolidate or merge; make
loans and investments; enter into transactions with affiliates;
use loan proceeds for certain purposes; guarantee obligations
and incur contingent obligations; pay dividends or make
distributions or stock repurchases; make significant changes in
accounting practices; or change the Companys fiscal year.
The Loan Amendment also modified certain of these covenants and
imposed certain additional covenants.

The Loan Facility also requires the Company to
maintain the same financial ratios as in the Credit Facility.
The Loan Amendment also modified certain of these financial
covenants and imposed certain additional financial covenants.

The Companys failure to satisfy any of
these covenants is an event of default under the Loan Facility.
The Loan Facility also includes other customary events of
default, including, among other things, a cross-default to the
Companys other material indebtedness and certain changes
of control.

In 1997, as part of the acquisition of certain
service station/convenience stores, the Company leased
64 service station/convenience stores for a period of
10 years with options to purchase the assets during the
ten-year period for approximately $22,904,000. These leases were
accounted for as capital leases. At December 31, 2002, six
stores remained to be purchased and continue to be leased under
the original terms. One of these stores is a grocery store and
does not sell gasoline. The Company intends to purchase the six
stores pursuant to options to purchase during the remaining
lease period for approximately $6,703,000, of which $2,000,000
has been paid in advance and is recorded in Other
Assets in the Companys Consolidated Balance Sheet.
The remaining lease obligations of approximately $6,703,000 are
being accounted for as capital

72



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##### 



leases and require annual lease payments of
approximately $753,000, all of which are recorded as interest
expense. Assets associated with these lease obligations of
approximately $7,166,000 are included in property, plant and
equipment. Accumulated depreciation as of December 31, 2002
of approximately $3,537,000 is related to these assets. Assets
of $580,000, primarily liquor licenses, are included in other
assets.


Aggregate annual maturities of long-term debt,
excluding unamortized discount, as of December 31, 2002
are: 2003  $10,251,000; 2004  $11,128,000;
2005  $35,889,000; 2006  $0;
2007  $156,703,000; and all years
thereafter  $200,000,000.

Note 12  Financial Instruments and
Hedging Activity

The following disclosure of the estimated fair
value of financial instruments is made in accordance with the
requirements of SFAS No. 107, Disclosures about
Fair Value of Financial Instruments, as amended by
SFAS No. 133. The Company, using available market
information and valuation methodologies described below,
determined the estimated fair value amounts. Considerable
judgment is required, however, in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates
presented herein may not be indicative of the amounts that the
Company could realize in a current market exchange. The use of
different market assumptions or valuation methodologies may have
a material effect on the estimated fair value amounts.

The carrying amounts and estimated fair values of
the Companys financial instruments are as follows:

|                                       |                           |                |   |            |  |          |   |            |  |  |   |         |  |  |   |         | 
|-------------------------------------- | ------------------------- | -------------- | - | ---------- |  | -------- | - | ---------- |  |  | - | ------- |  |  | - | ------- | 
|                                       |                           |               
|                                       |                           | December 31,  
|                                       |                           |               
|                                       |                           |                |   |           
|                                       |                           | 2002           |   | 2001      
|                                       |                           |                |   |           
|                                       |                           | Carrying       |   | Estimated  |  | Carrying |   | Estimated 
|                                       |                           | Amount         |   | Fair Value |  | Amount   |   | Fair Value
|                                       |                           |                |   |            |  |          |   |           
|                                       |                           |               
|                                       |                           | (In thousands)
|Balance Sheet  Financial Instruments: |                           |                |   |            |  |          |   |            |  |  |   |         |  |  |   |        
|                                       | Fixed rate long-term debt |                | $ | 401,617    |  |          | $ | 365,264    |  |  | $ | 250,091 |  |  | $ | 244,633 | 

The fair value of fixed rate long-term debt was
determined using quoted market prices, where applicable, or
estimated by discounting future cash flows using rates estimated
to be currently available for debt of similar terms and
remaining maturities.

The carrying values of cash and cash equivalents,
receivables, accounts payable and accrued expenses approximate
fair values due to the short-term maturities of these
instruments. Variable rate long-term debt instruments are
estimated to approximate fair values as rates are tied to
short-term indices.

The Company also has a $5,000,000 long-term note
receivable with a related party. This note was fully reserved
for at December 31, 2002 and 2001.

Hedging
Activities

The Company is exposed to various market risks,
including changes in certain commodity prices and interest
rates. To manage the volatility relating to these normal
business exposures, the Company, from time to time, uses
commodity futures and options contracts to reduce price
volatility, to fix margins in its refining and marketing
operations and to protect against price declines associated with
its crude oil and finished products inventories.

The Company entered into various crude oil
futures contracts in order to economically hedge crude oil
inventories and crude oil purchases for the Yorktown refinery
operations. For the year ended December 31, 2002, the
Company recognized losses on these contracts of approximately
$1,637,000 in cost of products sold. These transactions did not
qualify for hedge accounting in accordance with
SFAS No. 133 Accounting for Derivative
Instruments and Hedging Activities, as amended, and
accordingly were marked to market each month.

For 2001 and 2000 the Company incurred losses of
$10,000 and $471,000, respectively, related to these activities.

73



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At December 31, 2002 and 2001, the Company
had no open crude oil futures contracts or other commodity
derivatives.

Note 13  Income
Taxes

The provision (benefit) for income taxes from
continuing operations is comprised of the following:

|                                                         |  |                         |        |      |  |      |       |   |  |   |       |  
|-------------------------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                                         |  |                        
|                                                         |  | Year Ended December 31,
|                                                         |  |                        
|                                                         |  | 2002                    |        | 2001 |  | 2000
|                                                         |  |                         |        |      |  |     
|                                                         |  |                        
|                                                         |  | (In thousands)         
|Current: Federal                                         |  | $                       | (6,979 | )    |  | $    | 3,190 |   |  | $ | 4,336 |  
|State                                                    |  |                         | (1,238 | )    |  |      | 624   |   |  |   | 198   |  
|                                                         |  |                         |        |      |  |      |       |   |  |   |       |  
|                                                         |  |                         | (8,217 | )    |  |      | 3,814 |   |  |   | 4,534 |  
|                                                         |  |                         |        |      |  |      |       |   |  |   |       |  
|Deferred: Federal                                        |  |                         | (796   | )    |  |      | 4,184 |   |  |   | (628  | )
|State                                                    |  |                         | 927    |      |  |      | (14   | ) |  |   | 196   |  
|                                                         |  |                         |        |      |  |      |       |   |  |   |       |  
|                                                         |  |                         | 131    |      |  |      | 4,170 |   |  |   | (432  | )
|                                                         |  |                         |        |      |  |      |       |   |  |   |       |  
|Total provision (benefit) from continuing
    operations |  | $                       | (8,086 | )    |  | $    | 7,984 |   |  | $ | 4,102 |  
|                                                         |  |                         |        |      |  |      |       |   |  |   |       |  

Income taxes paid in 2002, 2001, and 2000 were
$472,000, $4,675,000, and $4,060,000, respectively.

Income taxes refunded in 2002 were $3,938,000.

A reconciliation of the difference between the
provision (benefit) for income taxes and income taxes at the
statutory U.S. federal income tax rate for continuing
operations is as follows:

|                                                                      |                                   |                         |        |      |   |      |       |      |   |   |       |      |  
|--------------------------------------------------------------------- | --------------------------------- | ----------------------- | ------ | ---- | - | ---- | ----- | ---- | - | - | ----- | ---- | -
|                                                                      |                                   |                        
|                                                                      |                                   | Year Ended December 31,
|                                                                      |                                   |                        
|                                                                      |                                   | 2002                    |        | 2001 |   | 2000
|                                                                      |                                   |                         |        |      |   |     
|                                                                      |                                   |                        
|                                                                      |                                   | (In thousands)         
|Income taxes at the statutory U.S. federal
    income tax rate of 35% |                                   | $                       | (7,035 | )    |   | $    | 7,263 |      |   | $ | 4,015 |     
|Increase (decrease) in taxes resulting from:                          |                                   |                         |        |      |   |      |       |      |   |   |       |     
|                                                                      | State taxes, net                  |                         |        | (980 | ) |      |       | 947  |   |   |       | 307  |  
|                                                                      | Nonconventional fuel credits, net |                         |        |     |   |      |       |     |   |   |       | (249 | )
|                                                                      | Other, net                        |                         |        | (71  | ) |      |       | (226 | ) |   |       | 29   |  
|                                                                      |                                   |                         |        |      |   |      |       |      |   |   |       |     
|                                                                      |                                   | $                       | (8,086 | )    |   | $    | 7,984 |      |   | $ | 4,102 |     
|                                                                      |                                   |                         |        |      |   |      |       |      |   |   |       |     

74



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Deferred income taxes are provided to reflect
temporary differences in the basis of net assets for income tax
and financial reporting purposes, as well as available tax
credit carryforwards. The tax effected temporary differences and
credit carryforwards which comprise deferred taxes are as
follows:

|                                  |                                              |                   |        |                   |        |        |      |         |         |             |        |         |         |         |       |       |        |        |   |         |         |         |       |         |         |         |  
|--------------------------------- | -------------------------------------------- | ----------------- | ------ | ----------------- | ------ | ------ | ---- | ------- | ------- | ----------- | ------ | ------- | ------- | ------- | ----- | ----- | ------ | ------ | - | ------- | ------- | ------- | ----- | ------- | ------- | ------- | -
|                                  |                                              |                   |        |                  
|                                  |                                              | December 31, 2002 |        | December 31, 2001
|                                  |                                              |                   |        |                  
|                                  |                                              | Assets            |        | Liabilities       |        | Total  |      | Assets  |         | Liabilities |        | Total  
|                                  |                                              |                   |        |                   |        |        |      |         |         |             |        |        
|                                  |                                              |                  
|                                  |                                              | (In thousands)   
|Deductible Temporary Differences: |                                              |                   |        |                   |        |        |      |         |         |             |        |         |         |         |       |       |        |        |   |         |         |         |       |        
|                                  | Accounts receivable                          |                   | $      | 182               |        |        | $    |        |         |             | $      | 182     |         |         | $     | 156   |        |        | $ |        |         |         | $     | 156     |        
|                                  | Insurance accruals                           |                   |        | 579               |        |        |      |        |         |             |        | 579     |         |         |       | 672   |        |        |   |        |         |         |       | 672     |        
|                                  | Insurance settlements                        |                   |        | 24                |        |        |      |        |         |             |        | 24      |         |         |       | (94   | )      |        |   |        |         |         |       | (94     | )      
|                                  | Vacation accruals                            |                   |        | 1,227             |        |        |      |        |         |             |        | 1,227   |         |         |       | 897   |        |        |   |        |         |         |       | 897     |        
|                                  | Other reserves                               |                   |        | 1,207             |        |        |      |        |         |             |        | 1,207   |         |         |       | 1,009 |        |        |   |        |         |         |       | 1,009   |        
|                                  | Accrued environmental and retirement         |                   |        | 6,700             |        |        |      |        |         |             |        | 6,700   |         |         |       |      |        |        |   |        |         |         |       |        |        
|                                  | Lower of cost or market on inventory accrual |                   |        |                  |        |        |      |        |         |             |        |        |         |         |       | 1,306 |        |        |   |        |         |         |       | 1,306   |        
|Taxable inventory costs           |                                              |                   |       |                   |        |        | (150 | )       |         |             | (150   | )       |         |         | (211  | )     |        |        |  |         |         |         | (211  | )      
|                                  |                                              |                   |        |                   |        |        |      |         |         |             |        |         |         |         |       |       |        |        |   |         |         |         |       |        
|                                  |                                              | Total current     |        |                   | 9,919  |        |      |         | (150    | )           |        |         | 9,769   |         |       |       | 3,735  |        |   |         |        |         |       |         | 3,735   |        
|                                  |                                              |                   |        |                   |        |        |      |         |         |             |        |         |         |         |       |       |        |        |   |         |         |         |       |        
|Deductible Temporary Differences: |                                              |                   |        |                   |        |        |      |         |         |             |        |         |         |         |       |       |        |        |   |         |         |         |       |        
|                                  | Other accruals                               |                   |        | 1,211             |        |        |      | (126    | )       |             |        | 1,085   |         |         |       | 1,101 |        |        |   | (98     | )       |         |       | 1,003   |        
|                                  | Other                                        |                   |        | 1,916             |        |        |      | (453    | )       |             |        | 1,463   |         |         |       | 1,978 |        |        |   | (877    | )       |         |       | 1,101   |        
|Taxable Temporary Differences:    |                                              |                   |        |                   |        |        |      |         |         |             |        |         |         |         |       |       |        |        |   |         |         |         |       |        
|                                  | Accelerated plant costs                      |                   |        |                  |        |        |      | (1,176  | )       |             |        | (1,176  | )       |         |       |      |        |        |   | (1,660  | )       |         |       | (1,660  | )      
|                                  | Accelerated depreciation                     |                   |        |                  |        |        |      | (52,764 | )       |             |        | (52,764 | )       |         |       |      |        |        |   | (41,575 | )       |         |       | (41,575 | )      
|                                  | Inventory tax basis difference               |                   |        |                  |        |        |      | (5,968  | )       |             |        | (5,968  | )       |         |       |      |        |        |   |        |         |         |       |        |        
|Net operating loss carryforward   |                                              |                   | 9,531  |                   |        |        |     |         |         |             | 9,531  |         |         |         |      |       |        |        |  |         |         |         |      |        
|Tax credit carryforwards          |                                              |                   | 10,217 |                   |        |        |     |         |         |             | 10,217 |         |         |         | 8,359 |       |        |        |  |         |         |         | 8,359 |        
|                                  |                                              |                   |        |                   |        |        |      |         |         |             |        |         |         |         |       |       |        |        |   |         |         |         |       |        
|                                  |                                              | Total noncurrent  |        |                   | 22,875 |        |      |         | (60,487 | )           |        |         | (37,612 | )       |       |       | 11,438 |        |   |         | (44,210 | )       |       |         | (32,772 | )      
|                                  |                                              |                   |        |                   |        |        |      |         |         |             |        |         |         |         |       |       |        |        |   |         |         |         |       |        
|                                  |                                              |                   | Total  |                   | $      | 32,794 |      |         | $       | (60,637     | )      |         | $       | (27,843 | )     |       | $      | 15,173 |   |         | $       | (44,210 | )     |         | $       | (29,037 | )
|                                  |                                              |                   |        |                   |        |        |      |         |         |             |        |         |         |         |       |       |        |        |   |         |         |         |       |        

At December 31, 2002, the Company had an
alternative minimum tax credit carryforward and a general
business credit of approximately $9,407,000 and $810,000,
respectively. Alternative minimum tax credits can be carried
forward indefinitely and the general business credits expire in
2022. The Companys net operating loss carryover will
expire in 2022.

Note 14  401(k) and Employee
Stock Ownership Plans

On May 14, 2002, the Company adopted the
Giant Yorktown 401(k) Retirement Savings Plan (Yorktown
401(k)). The Yorktown 401(k) is for the employees of Giant
Yorktown, Inc. who meet plan eligibility requirements. For
purposes of eligibility and vesting, anyone who was employed by
Giant Yorktown, Inc. on or before December 31, 2002,
received credit for time worked for BP and certain other prior
employers. The Company matches the employees contributions
to the Yorktown 401(k) at a rate of 100% up to a maximum of 7%
of the employees annual compensation, subject to a per
participant maximum contribution amount. Annual compensation for
2002 is that eligible compensation for the period May 14,
2002 through December 31, 2002. For the year ended
December 31, 2002, the Company expensed $546,000 for
matching contributions under this plan. The Companys
matching contribution can be invested in available options at
the discretion of the participant. The Company did not make a
discretionary contribution to this plan for the year ended
December 31, 2002.

75



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For its other employees who meet plan eligibility
requirements, the Company has the Giant Industries, Inc and
Affiliated Companies 401(k) Plan (Giant 401(k)).
Until it was merged into the Giant 401(k) effective
December 31, 2000, the Company also had an Employee Stock
Ownership Plan (ESOP), which was a noncontributory
defined contribution plan established primarily to acquire
shares of the Companys common stock. The ESOPs
assets were transferred into the Giant 401(k) on April 24,
2001. The plans were merged to reduce costs and simplify
reporting and accounting obligations. On December 31, 2000,
the ESOPs assets included 1,187,897 shares of the
Companys common stock. All of these shares were allocated
to the participants accounts effective as of
December 31, 2000. In addition to investments in the
Companys common stock, the ESOP held investments in a
balanced mutual fund. Contributions to the ESOP were made at the
discretion of the Companys Board of Directors. The Company
made contributions of $825,000 to the ESOP for 2000.

The Company matches the employees
contributions to the Giant 401(k) at a rate of 50% up to a
maximum of 6% of the employees annual compensation,
subject to a per participant maximum contribution amount. For
the years ended December 31, 2002, 2001, and 2000, the
Company expensed $1,560,000, $1,454,000, and $1,415,000,
respectively, for matching contributions under this plan. The
Companys matching contribution can be invested in
available options at the discretion of the participant.
Additional contributions to the Giant 401(k) are made at the
discretion of the Companys Board of Directors. For the
year ended December 31, 2002, the Company accrued $900,000
for a discretionary contribution to the Giant 401(k). This
discretionary contribution will be funded with newly issued
shares of the Companys common stock. For the year ended
December 31, 2001, the Company made a discretionary cash
contribution of $900,000 to the 401(k). These discretionary
contributions are similar to the discretionary contributions
made in past years to the ESOP. The cash contribution was used
to purchase shares of the Companys common stock. All
shares are allocated to eligible employees accounts in the
manner set forth in the Giant 401(k). At December 31, 2002
and 2001, the assets of the 401(k) included 1,159,384 and
995,568 shares of the Companys common stock, respectively.

Note 15  Pension and
Post-Retirement Benefits

The Giant Yorktown Cash Balance Plan (Cash
Plan) is a defined benefit plan for the employees of Giant
Yorktown, Inc. and was established in 2002. The Cash Plan is a
cash balance retirement plan fully funded by the
Company without employee contributions. All employees of Giant
Yorktown, Inc. meeting the eligibility requirements are
automatically included in the Cash Plan. Under the Cash Plan, an
account is established for each eligible employee that in
general reflects pay credits, based on a percentage of eligible
pay determined by age or years of service, whichever yields the
greater percentage, plus regular interest credits. Interest
credits are generally equal to the greater of 5% or the 12-month
average of the one-year U.S. Treasury constant maturity
rates plus 1%. Yorktown employees who were covered by the BP
retirement plan on July 1, 2000, are generally eligible for
a grandfather provision that affects the calculation of the
benefit under the plan.

The Company must make a lump-sum payment to the
Cash Plan each year. The amount of the Companys annual
payment is based on various factors, including actuarial
calculations linked to the potential retirement ages of Yorktown
employees. The Companys payment to the Cash Plan for the
year ending December 31, 2002 will be $868,000 and will be
made by August 2003. For the year ending December 31, 2003,
the Company estimates that the annual payment for the Cash Plan
will be approximately $1,500,000.

The Giant Yorktown Retiree Medical Plan (the
Medical Plan) is a defined post-retirement benefit
plan for the employees of Giant Yorktown, Inc. and was
established in 2002. The Medical Plan will pay a percentage of
the medical premium for coverage under the plan. Coverage is
generally available to full-time employees who are age 50 or
older with 10 or more years of service. The Company will pay
from 50% to 80% of the premium cost, depending on age and years
of service. Unlike the Cash Plan, the Company is not required to
fund the Medical Plan on an annual basis. The Company did not
make a payment to the Medical Plan for the year ending
December 31, 2002 and does not anticipate making a payment
to the Medical Plan for the year ending December 31, 2003.

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The following table contains the disclosures for
the Companys pension plan and retiree medical plan for
2002.

|                                                  |                                                |              |            |              |  |   |            |           | 
|------------------------------------------------- | ---------------------------------------------- | ------------ | ---------- | ------------ |  | - | ---------- | --------- | 
|                                                  |                                                | Cash         |            | Retiree     
|                                                  |                                                | Balance Plan |            | Medical Plan
|                                                  |                                                |              |            |             
|Reconciliation of benefit obligation:             |                                                |              |            |              |  |   |            |          
|                                                  | Benefit obligation at beginning of year        |              | $          |             |  |   | $          |          | 
|                                                  | Service cost                                   |              |            | 576,969      |  |   |            | 101,972   | 
|                                                  | Interest cost                                  |              |            | 310,251      |  |   |            | 93,005    | 
|                                                  | Benefit paid                                   |              |            |             |  |   |            |          | 
|                                                  | Actuarial loss                                 |              |            | 401,341      |  |   |            | 162,660   | 
|                                                  | Plan amendments                                |              |            |             |  |   |            |          | 
|                                                  | Acquisitions                                   |              |            | 7,262,000    |  |   |            | 2,141,000 | 
|                                                  |                                                |              |            |              |  |   |            |          
|                                                  | Benefit obligation at end of year              |              | $          | 8,550,561    |  |   | $          | 2,498,637 | 
|                                                  |                                                |              |            |              |  |   |            |          
|Reconciliation of plan assets:                    |                                                |              |            |              |  |   |            |          
|                                                  | Fair value of plan assets at beginning of year |              | $          |             |  |   | $          |          | 
|                                                  | Actual return on plan assets                   |              |            |             |  |   |            |          | 
|                                                  | Employer contributions                         |              |            |             |  |   |            |          | 
|                                                  | Benefits paid                                  |              |            |             |  |   |            |          | 
|                                                  | Acquisitions                                   |              |            |             |  |   |            |          | 
|                                                  |                                                |              |            |              |  |   |            |          
|                                                  | Fair value of plan assets at end of year       |              | $          |             |  |   | $          |          | 
|                                                  |                                                |              |            |              |  |   |            |          
|Unfunded status                                   |                                                | $            | (8,550,561 | )            |  | $ | (2,498,637 | )        
|Unrecognized net transition obligation            |                                                |              |           |              |  |   |           |          
|Unrecognized net prior service cost               |                                                |              |           |              |  |   |           |          
|Unrecognized net loss                             |                                                |              | 401,341    |              |  |   | 162,660    |          
|                                                  |                                                |              |            |              |  |   |            |          
|Accrued benefit cost                              |                                                | $            | (8,149,220 | )            |  | $ | (2,335,977 | )        
|                                                  |                                                |              |            |              |  |   |            |          
|Weighted-average assumptions at end of year:      |                                                |              |            |              |  |   |            |          
|Discount rate                                     |                                                |              | 6.50       | %            |  |   | 6.50       | %        
|Expected return on assets                         |                                                |              | 8.50       | %            |  |   | 8.50       | %        
|Salary scale                                      |                                                |              | 4.00       | %            |  |   |           |          
|                                                 
|Net periodic benefit cost included the following: |                                                |              |            |              |  |   |            |          
|                                                  | Service cost                                   |              | $          | 576,969      |  |   | $          | 101,972   | 
|                                                  | Interest cost                                  |              |            | 310,251      |  |   |            | 93,005    | 
|                                                  | Expected return on assets                      |              |            |             |  |   |            |          | 
|                                                  | Amortization of prior service cost             |              |            |             |  |   |            |          | 
|                                                  | Recognized net actuarial (gain)/loss           |              |            |             |  |   |            |          | 
|                                                  |                                                |              |            |              |  |   |            |          
|                                                  | Net periodic benefit cost                      |              | $          | 887,220      |  |   | $          | 194,977   | 
|                                                  |                                                |              |            |              |  |   |            |          

Assumed health care cost trend rates have a
significant effect on the amounts reported for the health care
plan. A 1%-point change in assumed health care cost trend rates
would have the following effect:

|                                                            |  |          |        |          |  |   |         |  
|----------------------------------------------------------- |  | -------- | ------ | -------- |  | - | ------- | -
|                                                            |  |         
|                                                            |  | 1%-Point
|                                                            |  |         
|                                                            |  | Increase |        | Decrease
|                                                            |  |          |        |         
|Effect on total of service and interest cost
    components |  | $        | 6,906  |          |  | $ | (6,695  | )
|Effect on postretirement benefit obligation                 |  |          | 88,351 |          |  |   | (85,646 | )

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Note 16  Stock Incentive
Plans

Under the 1998 Stock Incentive Plan (the
1998 Plan), shares of the Companys common
stock are authorized to be issued to deserving employees in
connection with awards of options, appreciation rights,
restricted shares, performance shares or performance units, all
as defined in the 1998 Plan. Appreciation rights, performance
shares and performance units may be settled in cash, common
shares of the Company or any combination thereof.

The total number of shares available for grant
under the 1998 Plan is 2% of the total number of common shares
outstanding as of the first day of each calendar year, which
amount was 171,077 shares for 2002, 178,960 shares for 2001, and
206,070 shares for 2000. Grants also are subject to a 400,000
share annual limitation on the number of common shares available
for the grant of options that are intended to qualify as
incentive stock options under Section 422 of
the Internal Revenue Code. Common shares available for grant in
any particular calendar year that are not, in fact, granted in
such year cannot be added to the common shares available for
grant in any subsequent calendar year. For 2003, the number of
shares available for grant is 171,435.

On December 11, 2002, 171,000 incentive
stock options were granted to 13 employees under the 1998
Plan. The exercise price for all of the options was $2.85, which
was the closing price of the Companys Common Stock on the
New York Stock Exchange on the date of grant. One-half of
each grant vests on December 11, 2003 and the remaining
one-half on December 11, 2004. All of the options expire on
December 10, 2012.

On May 17, 2001, 177,500 nonqualified stock
options were granted to 13 employees under the 1998 Plan. The
exercise price for all of the options was $9.95, which was the
closing price for the Companys Common Stock on the New
York Stock Exchange on the date of grant. One-third of each
grant vested on the date of grant, one-third on May 17,
2002, and the remaining one-third on May 17, 2003. All of
the options expire on May 16, 2011.

No grants were made in 2000.

The 1998 Plan provides that all grants are
subject to restrictions, conditions and terms more specifically
described in the 1998 Plan, including, but not limited to, the
exercise price for stock options and appreciation rights and
time vesting requirements for all awards. In general, the 1998
Plan provides that grants of stock options and appreciation
rights must expire no more than 10 years from the date of
grant. In addition, all grants under the 1998 Plan are subject
to forfeiture under certain circumstances, and all unvested
awards may vest immediately under various circumstances defined
in the 1998 Plan.

Under the Companys 1989 Stock Incentive
Plan (the 1989 Plan), 500,000 shares of the
Companys common stock were authorized to be issued to
deserving employees in the form of options and/or restricted
stock. At December 31, 2002, no shares were available for
future grants under the 1989 Plan because, by its terms, no new
awards may be made after December 11, 1999.

All of the options or restricted stock granted
under the 1989 Plan are fully vested. At December 31, 2002,
103,550 shares granted under the 1989 Plan remained to be
exercised.

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The following summarizes stock option
transactions under the 1989 and 1998 Plans:

|                                    |           |        |         |                  |   |   |       |       | 
|----------------------------------- | --------- | ------ | ------- | ---------------- | - | - | ----- | ----- | 
|                                    |           |        |         | Weighted Average
|Options Outstanding At              |           | Shares |         | Exercise Price  
|                                    |           |        |         |                 
|January 1, 2000                     |           |        | 410,551 |                  |   | $ | 10.36 |      
|                                    | Exercised |        |         | (16,500          | ) |   |       | 6.61  | 
|                                    | Forfeited |        |         | (15,000          | ) |   |       | 14.88 | 
|                                    | Expired   |        |         | (5,000           | ) |   |       | 10.50 | 
|                                    |           |        |         |                  |   |   |       |      
|December 31, 2000                   |           |        | 374,051 |                  |   |   | 10.34 |      
|                                    | Granted   |        |         | 177,500          |   |   |       | 9.95  | 
|                                    | Exercised |        |         | (126,601         | ) |   |       | 8.74  | 
|                                    | Expired   |        |         | (26,000          | ) |   |       | 10.63 | 
|                                    |           |        |         |                  |   |   |       |      
|December 31, 2001                   |           |        | 398,950 |                  |   |   | 10.65 |      
|                                    | Granted   |        |         | 171,000          |   |   |       | 2.85  | 
|                                    | Exercised |        |         | (17,900          | ) |   |       | 5.25  | 
|                                    |           |        |         |                  |   |   |       |      
|December 31, 2002                   |           |        | 552,050 |                  |   | $ | 8.41  |      
|                                    |           |        |         |                  |   |   |       |      
|Options exercisable at December 31: |           |        |         |                  |   |   |       |      
|                                    | 2002      |        |         | 321,876          |   |   | $     | 11.08 | 
|                                    | 2001      |        |         | 280,613          |   |   |       | 10.95 | 
|                                    | 2000      |        |         | 298,251          |   |   |       | 10.07 | 

The following summarizes information about stock
options outstanding under the 1989 and 1998 Plans at
December 31, 2001:

|                |  |                     |         |                     |  |             |           |                |  |  |         |  |  |   |       | 
|--------------- |  | ------------------- | ------- | ------------------- |  | ----------- | --------- | -------------- |  |  | ------- |  |  | - | ----- | 
|                |  |                     |         |                    
|                |  | Options Outstanding |         | Options Exercisable
|                |  |                     |         |                    
|                |  |                     |         | Weighted            |  |            
|                |  |                     |         | Average             |  |             |           | Weighted      
|Range of        |  | Number              |         | Remaining           |  | Number      |           | Average       
|Exercise Prices |  | Outstanding         |         | Contractual Life    |  | Exercisable |           | Exercise Price
|                |  |                     |         |                     |  |             |           |               
|$ 7.75          |  |                     | 47,750  |                     |  |             | 0.3 years |                |  |  | 47,750  |  |  | $ | 7.75  | 
|12.00 to 18.50  |  |                     | 100,000 |                     |  |             | 5.1 years |                |  |  | 100,000 |  |  |   | 15.25 | 
|8.88            |  |                     | 55,800  |                     |  |             | 8.4 years |                |  |  | 55,800  |  |  |   | 8.88  | 
|9.95            |  |                     | 177,500 |                     |  |             | 5.9 years |                |  |  | 118,326 |  |  |   | 9.95  | 
|2.85            |  |                     | 171,000 |                     |  |             | 9.9 years |                |  |  |        |  |  |   |      | 
|                |  |                     |         |                     |  |             |           |                |  |  |         |  |  |   |       | 
|                |  |                     | 552,050 |                     |  |             | 7.3 years |                |  |  | 321,876 |  |  | $ | 11.08 | 
|                |  |                     |         |                     |  |             |           |                |  |  |         |  |  |   |       | 

In October 1995, the FASB issued SFAS
No. 123 Accounting for Stock Based
Compensation. At that time, the Company determined that it
would not change to the fair value method prescribed in the
Statement and would continue to use the intrinsic value method
to account for stock-based employee compensation. In December
2002, the FASB issued SFAS No. 148 Accounting for
Stock-Based Compensation  Transition and Disclosure,
an amendment of FASB Statement No. 123. SFAS 148
amends SFAS 123 to permit alternative methods of transition
for adopting a fair value based method of accounting for
stock-based employee compensation. The Company is evaluating
whether or not it will adopt the provisions of SFAS No. 148
in 2003.

The Company has adopted the disclosure-only
provisions of SFAS No. 123. If the Company had elected to
recognize compensation costs based on the fair value at the date
of grant for awards granted in 2002, 2001, 1999 and 1998,
consistent with the provisions of SFAS No. 123, the
Companys net earnings (loss) and diluted earnings (loss)
per share for the years ended December 31, 2002, 2001, and
2000 would have decreased (increased) by approximately
$(193,000) and $(0.02) per share, $634,000 and $0.07 per share,
and $289,000 and $0.03 per share, respectively.

79



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The pro forma effects of applying SFAS
No. 123 in this disclosure are not necessarily indicative
of future amounts.

The estimated weighted average fair values of
options granted during 2002, 2001, and 1999 were $1.81, $5.96,
and $9.14 per share, respectively, and were estimated using the
Black-Scholes option-pricing model with the following weighted
average assumptions:

|                        |  |      |     |      |  |      |     |   |  |  |     |  
|----------------------- |  | ---- | --- | ---- |  | ---- | --- | - |  |  | --- | -
|                        |  | 2002 |     | 2001 |  | 1999
|                        |  |      |     |      |  |     
|Expected life in years  |  |      | 7   |      |  |      | 8   |   |  |  | 8   |  
|Risk-free interest rate |  |      | 4.0 | %    |  |      | 5.4 | % |  |  | 6.5 | %
|Volatility              |  |      | 61  | %    |  |      | 47  | % |  |  | 45  | %
|Dividend Yield          |  |      |    |      |  |      |    |   |  |  |    |  

Note 17  Interest, Operating Leases
and Rent Expense

Interest paid and capitalized for 2002 was
$34,426,000 and $0, for 2001 was $24,135,000 and $0, and for
2000 was $24,458,000 and $62,000, respectively.

As discussed in Note 3, on December 31,
1998, the Company and FFCA completed a sale-leaseback
transaction. Under the terms of the Agreement, FFCA purchased 83
service station/ convenience stores from the Company and the
Company in turn leased the 83 service station/ convenience
stores back from FFCA under an operating lease arrangement with
an initial term of 15 years and three separate options to
continue the lease for successive periods of five years. The
Company reacquired 24 of the service station/ convenience stores
in the second half of 1999 and the remaining 59 in the third
quarter of 2001.

The Company is committed to annual minimum
rentals under noncancelable operating leases that have initial
or remaining lease terms in excess of one year as of
December 31, 2002 as follows:

|                                |  |                  |        | 
|------------------------------- |  | ---------------- | ------ | 
|                                |  | Land, Building, 
|                                |  | Machinery and   
|                                |  | Equipment Leases
|                                |  |                 
|                                |  | (In thousands)  
|2003                            |  | $                | 4,391  | 
|2004                            |  |                  | 2,744  | 
|2005                            |  |                  | 1,964  | 
|2006                            |  |                  | 1,598  | 
|2007                            |  |                  | 939    | 
|2008  2024                     |  |                  | 5,602  | 
|                                |  |                  |        | 
|Total minimum payments required |  | $                | 17,238 | 
|                                |  |                  |        | 

Total rent expense was $6,140,000, $8,459,000,
and $11,017,000 for 2002, 2001, and 2000, respectively.

Note 18  Commitments and
Contingencies

Various legal actions, claims, assessments and
other contingencies arising in the normal course of the
Companys business, including those matters described
below, are pending against the Company and certain of its
subsidiaries. Certain of these matters involve or may involve
significant claims for compensatory, punitive or other damages.
These matters are subject to many uncertainties, and it is
possible that some of these matters could be ultimately decided,
resolved or settled adversely. The Company has recorded accruals
for losses related to those matters that it considers to be
probable and that can be reasonably estimated. Although the
ultimate amount of liability at December 31, 2002, that may
result from those matters for which the Company has recorded
accruals is not ascertainable, the Company believes that any
amounts exceeding the Companys recorded accruals should
not materially affect the Companys financial condition. It
is possible, however, that the ultimate resolution of these
matters could result in a material adverse effect on the
Companys results of operations for a particular reporting
period.

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Federal, state and local laws and regulations
relating to the environment, health, and safety affect nearly
all of the operations of the Company. As is the case with all
companies engaged in similar industries, the Company faces
significant exposure from actual or potential claims and
lawsuits brought by either governmental authorities or private
parties, alleging non-compliance with environmental, health, and
safety laws and regulations, or property damage or personal
injury caused by the environmental, health, or safety impacts of
current or historic operations. These matters include soil and
water contamination, air pollution and personal injuries or
property damage allegedly caused by substances manufactured,
handled, used, released or disposed of by the Company or by its
predecessors.

Future expenditures related to compliance with
environmental, health, and safety laws and regulations, the
investigation and remediation of contamination, and the defense
or settlement of governmental or private property claims and
lawsuits cannot be reasonably quantified in many circumstances
for various reasons. These reasons include the speculative
nature of remediation and clean-up cost estimates and methods,
imprecise and conflicting data regarding the hazardous nature of
various types of substances, the number of other potentially
responsible parties involved, various defenses that may be
available to the Company and changing environmental, health, and
safety laws, regulations, and their respective interpretations.



| |                       
| | ----------------------
| | Environmental Accruals

As of December 31, 2002 and 2001, the
Company had environmental liability accruals of approximately
$8,367,000 and $2,484,000, respectively, which are summarized
below. Environmental accruals are recorded in the current and
long-term sections of the Companys Consolidated Balance
Sheets.

Summary of Environmental
Contingencies

|                                      |        |                |     |            |  |          |       |          |  |   |      |        |   |   |       |       | 
|------------------------------------- | ------ | -------------- | --- | ---------- |  | -------- | ----- | -------- |  | - | ---- | ------ | - | - | ----- | ----- | 
|                                      |        | As of          |     | Increase   |  |          |       | As of   
|                                      |        | 12/31/01       |     | (Decrease) |  | Payments |       | 12/31/02
|                                      |        |                |     |            |  |          |       |         
|                                      |        |               
|                                      |        | (In thousands)
|Farmington Refinery                   |        | $              | 570 |            |  | $        |      |          |  | $ |     |        |   | $ | 570   |      
|Ciniza  Land Treatment Facility      |        |                | 208 |            |  |          |      |          |  |   | (19  | )      |   |   | 189   |      
|Bloomfield Tank Farm (Old Terminal)   |        |                | 149 |            |  |          | (48   | )        |  |   | (12  | )      |   |   | 89    |      
|Ciniza  Solid Waste Management Units |        |                | 286 |            |  |          |      |          |  |   | (11  | )      |   |   | 275   |      
|Bloomfield Refinery                   |        |                | 977 |            |  |          | (412  | )        |  |   | (255 | )      |   |   | 310   |      
|Ciniza Well Closures                  |        |                | 100 |            |  |          |      |          |  |   |     |        |   |   | 100   |      
|Retail Service Stations  Various     |        |                | 194 |            |  |          |      |          |  |   | (75  | )      |   |   | 119   |      
|Yorktown Refinery                     |        |                |    |            |  |          | 7,500 |          |  |   | (785 | )      |   |   | 6,715 |      
|                                      |        |                |     |            |  |          |       |          |  |   |      |        |   |   |       |      
|                                      | Totals |                | $   | 2,484      |  |          | $     | 7,040    |  |   | $    | (1,157 | ) |   | $     | 8,367 | 
|                                      |        |                |     |            |  |          |       |          |  |   |      |        |   |   |       |      

Approximately $7,684,000 of this accrual is for
the following projects discussed below: (i) the remediation
of the hydrocarbon plume that appears to extend no more than
1,800 feet south of the Companys inactive Farmington
refinery; (ii) environmental obligations assumed in
connection with the acquisitions of the Yorktown refinery and
the Bloomfield refinery; and (iii) hydrocarbon
contamination on and adjacent to the 5.5 acres that the
Company owns in Bloomfield, New Mexico. The remaining amount of
the accrual relates to the closure of certain solid waste
management units at the Ciniza refinery, which is being
conducted in accordance with the refinerys Resource
Conservation and Recovery Act permit; closure of the Ciniza
refinery land treatment facility including post-closure
expenses; estimated monitoring well closure costs at the Ciniza
refinery; and amounts for smaller remediation projects.



| |                                                    
| | ---------------------------------------------------
| | Notices of Violation at Four Corners
    Refineries

In June 2002, the Company received a draft
compliance order from the New Mexico Environment Department
(NMED) in connection with five alleged violations of
air quality regulations at the Ciniza

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refinery. These alleged violations relate to an
inspection completed in April 2001. Potential penalties could be
as high as $564,000.


In August 2002, the Company received a compliance
order from NMED in connection with four alleged violations of
air quality regulations at the Bloomfield refinery. These
alleged violations relate to an inspection completed in
September 2001. Potential penalties could be as high as $120,000.

The Company has provided information to NMED with
respect to both of the above matters that may result in the
modification or dismissal of some of the alleged violations and
reductions in the amount of potential penalties. The Company
expects to enter into discussions with NMED in the near future
concerning the information provided by the Company.



| |                            
| | ---------------------------
| | Farmington Refinery Matters

In 1973, the Company constructed the Farmington
refinery that was operated until 1982. The Company became aware
of soil and shallow groundwater contamination at this facility
in 1985. The Company hired environmental consulting firms to
investigate the contamination and undertake remedial action. The
consultants identified several areas of contamination in the
soils and shallow groundwater underlying the Farmington
property. A consultant to the Company has indicated that
contamination attributable to past operations at the Farmington
property has migrated off the refinery property, including a
hydrocarbon plume that appears to extend no more than
1,800 feet south of the refinery property. Remediation
activities are ongoing by the Company under the supervision of
the New Mexico Oil Conservation Division (OCD),
although no cleanup order has been received. The Companys
environmental reserve for this matter is approximately $570,000.



| |                   
| | ------------------
| | Lee Acres Landfill

The Farmington refinery property is located
adjacent to the Lee Acres Landfill (the Landfill), a
closed landfill formerly operated by San Juan County, which is
situated on lands owned by the United States Bureau of Land
Management (the BLM). Industrial and municipal
wastes were disposed of in the Landfill by numerous sources.
While the Landfill was operational, the Company used it to
dispose of office trash, maintenance shop trash, used tires and
water from the Farmington refinerys evaporation pond.

The Landfill was added to the National Priorities
List as a Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA) Superfund site in 1990. In
connection with this listing, EPA defined the site as the
Landfill and the Landfills associated groundwater plume.
EPA excluded any releases from the Farmington refinery itself
from the definition of the site. In May 1991, EPA notified the
Company that it may be a potentially responsible party under
CERCLA for the release or threatened release of hazardous
substances, pollutants or contaminants at the Landfill.

BLM made a proposed plan of action for the
Landfill available to the public in 1996. Remediation
alternatives examined by BLM in connection with the development
of its proposed plan ranged in projected cost from no cost to
approximately $14,500,000. BLM proposed the adoption of a
remedial action alternative that it believes would cost
approximately $3,900,000 to implement. BLMs $3,900,000
cost estimate is based on certain assumptions that may or may
not prove to be correct and is contingent on confirmation that
the remedial actions, once implemented, are adequately
addressing Landfill contamination. For example, if assumptions
regarding groundwater mobility and contamination levels are
incorrect, BLM is proposing to take additional remedial actions
with an estimated cost of approximately $1,800,000.

BLM has received public comment on its proposed
plan. The final remedy for the site, however, has not yet been
selected. Although the Company was given reason to believe that
a final remedy would be selected in 2002, that selection did not
occur. The Company has been advised that the site remedy may be
announced in 2003. In 1989, a consultant to the Company
estimated, based on various assumptions, that the Companys
share of potential liability could be approximately $1,200,000.
This figure was based upon estimated Landfill remediation costs
significantly higher than those being proposed by BLM. The
figure also was based on the consultants evaluation of
such factors as available clean-up technology, BLMs
involvement at the site and

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the number of other entities that may have had
involvement at the site, but did not include an analysis of all
of the Companys potential legal defenses and arguments,
including possible setoff rights.


Potentially responsible party liability is joint
and several, such that a responsible party may be liable for all
of the clean-up costs at a site even though the party was
responsible for only a small part of such costs. Although it is
possible that the Company may ultimately incur liability for
clean-up costs associated with the Landfill, a reasonable
estimate of the amount of this liability, if any, cannot be made
at this time because, among other reasons, the final site remedy
has not been selected, a number of entities had involvement at
the site, allocation of responsibility among potentially
responsible parties has not yet been made, and potentially
applicable factual and legal issues have not been resolved. The
Company has not recorded a liability in relation to BLMs
proposed plan because the amount of any potential liability is
currently not determinable.

BLM may assert claims against the Company and
others for reimbursement of investigative, cleanup and other
costs incurred by BLM in connection with the Landfill and
surrounding areas. It is also possible that the Company will
assert claims against BLM in connection with contamination that
may be originating from the Landfill. Private parties and other
governmental entities also may assert claims against BLM, the
Company and others for property damage, personal injury and
other damages allegedly arising out of any contamination
originating from the Landfill and the Farmington property.
Parties also may request judicial determination of their rights
and responsibilities, and the rights and responsibilities of
others, in connection with the Landfill and the Farmington
property. Currently, however, there is no outstanding litigation
against the Company by BLM or any other party.



| |                                                  
| | -------------------------------------------------
| | Bloomfield Refinery Environmental
    Obligations

In connection with the acquisition of the
Bloomfield refinery, the Company assumed certain environmental
obligations including Bloomfield Refining Companys
(BRC) obligations under an administrative order
issued by EPA in 1992 pursuant to the Resource Conservation and
Recovery Act (the Order). The Order required BRC to
investigate and propose measures for correcting any releases of
hazardous waste or hazardous constituents at or from the
Bloomfield refinery. EPA has delegated its oversight authority
over the Order to NMEDs Hazardous Waste Bureau
(HWB). In 2000, the OCD approved the groundwater
discharge permit for the refinery, which included an abatement
plan that addressed the Companys environmental obligations
under the Order. Discussions between OCD, HWB and the Company
have resulted in revisions to the abatement plan. In December
2002, the Company received written approval of the plan from HWB
and OCD, subject to various actions to be taken by the Company
to implement the plan. The Company estimates that remediation
expenses associated with the abatement plan will be
approximately $310,000, and that these expenses will be incurred
through approximately 2018. Accordingly, in 2002 the Company
reduced its accrual by $412,000 to reflect this estimate.



| |                                        
| | ---------------------------------------
| | Bloomfield Tank Farm (Old
    Terminal)

The Company has discovered hydrocarbon
contamination adjacent to a 55,000 barrel crude oil storage tank
(the Tank) that was located in Bloomfield, New
Mexico. The Company believes that all or a portion of the Tank
and the 5.5 acres owned by the Company on which the Tank
was located may have been a part of a refinery, owned by various
other parties, that, to the Companys knowledge, ceased
operations in the early 1960s. The Company received approval to
conduct a pilot bioventing project to address remaining
contamination at the site, which was completed in June 2001.
Based on the results of the pilot project, the Company submitted
a remediation plan to OCD proposing the use of bioventing to
address the remaining contamination. This remediation plan was
approved by OCD in June 2002. The Company anticipates that it
will incur approximately $100,000 in soil remediation expenses
through approximately 2004 in connection with the bioventing
plan and up to an additional $25,000 to continue groundwater
monitoring and testing until natural attenuation has completed
the process of groundwater remediation. The Company has an
environmental accrual of $89,000 for this matter.

83



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| |                                       
| | --------------------------------------
| | Yorktown Environmental
    Liabilities

The Company assumed certain liabilities and
obligations in connection with its purchase of the Yorktown
refinery from BP, but was provided with specified levels of
indemnification for certain matters. These liabilities and
obligations include, subject to certain exceptions and
indemnifications, all obligations, responsibilities,
liabilities, costs and expenses under environmental, health, and
safety laws that are caused by, arise from, or are incurred in
connection with or relate in any way to the ownership or
operation of the refinery. The Company has agreed to indemnify
BP from and against losses of any kind incurred in connection
with or related to liabilities and obligations assumed by the
Company. The Company only has limited indemnification rights
against BP.

Environmental obligations assumed by the Company
include BPs responsibilities under a consent decree among
various parties covering many locations. Parties to the consent
decree include the United States, BP Exploration and Oil Co.,
Amoco Oil Company, and Atlantic Richfield Company. The Company
assumed BPs responsibilities as of January 18, 2001,
the date the consent decree was lodged with the court. As
applicable to the Yorktown refinery, the consent decree
requires, among other things, reduction of NOx,
SO2 and particulate matter emissions and adoption of
enhancements to the refinerys leak detection and repair
program. The Company estimates that it will incur capital
expenditures in the approximate amount of $20,000,000 to
$27,000,000 to comply with the Consent Decree and that these
costs will be incurred over a period of approximately five
years, although the Company believes most of the expenditures
will be incurred in 2006. In addition, the Company estimates
that it will incur operating expenses associated with the
requirements of the Consent Decree of approximately $1,600,000
to $2,600,000 per year.

The environmental obligations assumed in
connection with the Yorktown acquisition also include BPs
obligations under an administrative order (the Yorktown
Order) issued by EPA in 1991 pursuant to the Resource
Conservation and Recovery Act (RCRA). The Yorktown
Order requires an investigation of certain areas of the refinery
and the development of measures to correct any releases of
contaminants or hazardous constituents found in these areas. A
RCRA Facility Investigation and a Corrective Measures Study
(RFI/ CMS) already has been prepared. It was revised
by BP, in draft form, to incorporate comments from EPA and the
Virginia Department of Environmental Quality (VDEQ),
although a final RFI/ CMS has not yet been approved. The draft
RFI/ CMS proposes certain investigation, sampling, monitoring,
and cleanup measures, including the construction of an on-site
corrective action management unit that would be used to
consolidate hazardous materials associated with these measures.
These proposed actions relate to soil, sludge, and remediation
wastes relating to certain solid waste management units,
groundwater in the aquifers underlying the refinery, and surface
water and sediment in a small pond and tidal salt marsh on the
refinery property. The Company anticipates that EPA may issue a
proposed course of action for public comment in the first half
of 2003. Following the public comment period, EPA will issue an
approved RFI and CMS in coordination with VDEQ and will make a
final remedy decision. The Company estimates that expenses
associated with the actions described in the proposed RFI/ CMS
will cost approximately $19,000,000 to $21,000,000, and will be
incurred over a period of approximately 30 years, with
approximately $5,000,000 of this amount being incurred over an
initial 3-year period, and additional expenditures in the
approximate amount of $5,000,000 being incurred over the
following 3-year period. The Company, however, may not be
responsible for all of these expenditures as a result of the
environmental indemnification provisions included in its
purchase agreement with BP, as more fully discussed below.

BP has agreed to indemnify, defend, save and hold
the Company harmless from and against all losses that are caused
by, arising from, incurred in connection with or relate in any
way to property damage caused by, or any environmental
remediation required due to, a violation of health, safety and
environmental laws during the operation of the refinery by BP.
In order to have a claim against BP, however, the aggregate of
all such losses must exceed $5,000,000, in which event a claim
only relates to the amount exceeding $5,000,000. After
$5,000,000 is reached, a claim is limited to 50% of the amount
by which the losses exceed $5,000,000 until the aggregate of all
such losses exceeds $10,000,000. After $10,000,000 is reached, a
claim would be for 100% of the amount by which the losses exceed
$10,000,000. In applying these provisions, losses amounting to
less than $250,000 in the aggregate arising out of the same
occurrence or matter are not aggregated with any other losses
for purposes of determining whether and when the $5,000,000 or
$10,000,000 has been reached. After

84



---



##### 



the $5,000,000 or $10,000,000 has been reached,
BP has no obligation to indemnify the Company with respect to
such matters for any losses amounting to less than $250,000 in
the aggregate arising out of the same occurrence or matter.
Except as specified in the Yorktown purchase agreement, in order
to seek indemnification from BP, the Company must notify BP of a
claim within two years following the closing date. Further,
BPs aggregate liability for indemnification under the
refinery purchase agreement, including liability for
environmental indemnification, is limited to $35,000,000.


On October 21, 2002, the Company received a
notice from EPA assessing it a penalty of $110,000 under the
consent decree in connection with a hydrocarbon flaring incident
at the Yorktown refinery. On November 18, 2002, the Company
received a second notice from EPA, correcting the earlier notice
and assessing a penalty of $137,500, which was later increased
to $163,100. The flaring occurred during a five-day period in
April 2002 following a power outage at the refinery. Since the
Company did not own the Yorktown refinery at the time the
flaring incident occurred, the Company believes that it will be
entitled to indemnification from BP for the entire amount of the
penalty. BP is participating in the Companys discussions
with EPA concerning this penalty, which may be contested.

Defense
Energy Support Center Claim

On February 11, 2003, the Company filed a
complaint against the United States in the United States Court
of Federal Claims in connection with military jet fuel that the
Company sold to the Defense Energy Support Center
(DESC) from 1983 through 1994. The Company asserted
that the United States, acting through DESC, underpaid for the
jet fuel in the approximate amount of $17,000,000. The Company
believes that its claims are supported by recent federal court
decisions, including decisions from the Court of Federal Claims,
dealing with contract provisions similar to those contained in
the contracts that are the subject of the Companys claims.
The DESC has indicated that it will counterclaim if the Company
pursues its claims and will assert, based on its interpretation
of the contract provisions that the Company may owe additional
amounts ranging from approximately $2,100,000 to $4,900,000. Due
to the preliminary nature of this matter, there can be no
assurance that the Company will ultimately prevail on its claims
nor is it possible to predict when any payment will be received
if the Company is successful. Accordingly, the Company has not
recorded a receivable for these claims or a liability for any
potential counterclaim.

Former CEO
Matters

James E. Acridge was terminated as the
Companys President and Chief Executive Officer, and was
replaced as the Companys Chairman, on March 29, 2002,
although he remains on the Board of Directors. The Company paid
Mr. Acridge the equivalent of his pre-termination base
salary until July 26, 2002. In addition, the Company
extended the exercise period of Mr. Acridges stock
options until June 29, 2003.

On July 22, 2002, Mr. Acridge filed a
lawsuit in the Superior Court of Arizona for Maricopa County
against current Company officers Messrs. Holliger, Gust,
Cox, and Bullerdick, and current Company directors
Messrs. Bernitsky, Kalen, and Rapport, and as yet
unidentified accountants, auditors, appraisers, attorneys,
bankers and professional advisors (the Lawsuit).
Mr. Acridge alleged that the defendants wrongfully
interfered with his employment agreement and caused the Company
to fire him. The complaint sought unspecified general
compensatory damages, punitive damages, and costs and
attorneys fees. The complaint also stated that
Mr. Acridge intended to initiate a separate arbitration
proceeding against the Company, alleging that the Company
breached his employment agreement and violated an implied
covenant of good faith and fair dealing. The court subsequently
ruled that the claims raised in the Lawsuit were subject to
arbitration and the Lawsuit was dismissed. Arbitration
proceedings in connection with the claims described above have
not yet been initiated. If proceedings are initiated, the claims
will be defended vigorously. The Company believes that the named
officers and directors of the Company are entitled to
indemnification from the Company in connection with the defense
of, and any liabilities arising out of, the claims asserted by
Mr. Acridge.

Mr. Acridge personally, and three entities
controlled by Mr. Acridge, have commenced Chapter 11
Bankruptcy proceedings. The entities controlled by Mr. Acridge
are Pinnacle Rodeo LLC (Pinnacle

85



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##### 



Rodeo), Pinnacle Rawhide LLC
(Pinnacle Rawhide), and Prime Pinnacle Peak
Properties, Inc. (Prime Pinnacle). The four
bankruptcy cases are jointly administered. It is unknown whether
and to what extent creditors, including the Company, will
receive any recovery on their respective debts from any of the
four bankruptcy estates.


As more fully described in Note 7 the Company has
an outstanding loan to Mr. Acridge in the principal amount
of $5,000,000. In the fourth quarter of 2001, the Company
established a reserve for the entire amount of the loan plus
interest accrued through December 31, 2001. In view of
developments in the bankruptcy proceeding relating to security
provided for the loan, the Company has continued to maintain the
reserve.

Giant Arizona has executed a lease for
approximately 8,176 square feet of additional space from a
limited liability company (the Landlord) in which
the bankruptcy estate of Prime Pinnacle owns a 51% interest.
Giant Arizona has executed a sublease with a separate limited
liability company controlled by Mr. Acridge for use of the space
as an inn. The initial term for each of the lease and the
sublease is for five years, terminating on June 30, 2003,
with one option to renew for an additional five years, which the
Company will not exercise, and the rent under each currently is
$21.76 per square foot. The rent is subject to adjustment
annually based on changes in the Consumer Price Index. The
sublease also provides that Giant Arizona may terminate the
sublease at any time upon 120 days prior written notice.
Except in connection with the settlement negotiations discussed
below, Giant Arizona has never made rental payments to the
Landlord, and believes that the landlord received payments
directly from the sublessee. In August 2001, the owner of the
49% interest in the Landlord notified Giant Arizona that the
sublessee was delinquent on the payment of the rent due, and on
or about December 28, 2001, such owner filed a derivative
lawsuit for and on behalf of the Landlord against Giant Arizona
to collect all amounts owing under the lease. Subsequently, the
matter was referred to arbitration by court order. Pursuant to a
letter dated January 16, 2002, the Company made a formal
demand on the sublessee for the sublessee to pay all of the past
due amounts and, on May 23, 2002, made a separate demand
for arbitration of this matter. In September 2002, the Company
entered into a settlement agreement, subject to certain action
by the bankruptcy court, in which it agreed to pay the Landlord
approximately $375,000 for rent and other monetary obligations
allegedly due under the lease from May 2001 through October
2002, and agreed to be responsible for future rental payments.
The settlement amounts are being paid into an escrow account
pending bankruptcy court approval. The bankruptcy court has not
yet taken the necessary action to approve the settlement, and as
a result of developments in the Prime Pinnacle bankruptcy
proceeding, settlement negotiations are continuing. If these
negotiations are not successful, the amounts in the escrow will
be returned to the Company and the Company intends to defend the
matter vigorously. Notwithstanding the settlement negotiations,
the Companys arbitration action against the sublessee is
still pending, and the Company has taken additional legal action
to both replace the sublessee with a receiver and to evict the
sublessee from the property.

86



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##### 



Note 19  Quarterly Financial
Information (Unaudited)(1)

|                         |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |         |  
|------------------------ | ------------------------------------------------------------ | -------------------------------------- | - | ------- | - | ----- | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                         |                                                              |                                       
|                         |                                                              | Year Ended December 31, 2002  Quarter
|                         |                                                              |                                       
|                         |                                                              | First                                  |   | Second  |   | Third |   | Fourth 
|                         |                                                              |                                        |   |         |   |       |   |        
|                         |                                                              |                                       
|                         |                                                              | (In thousands, except per share data) 
|Continuing Operations:   |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |        
|                         | Net revenues                                                 |                                        | $ | 186,436 |   |       | $ | 297,314 |   |  | $ | 392,193 |   |  | $ | 411,109 |  
|                         | Cost of products sold                                        |                                        |   | 141,311 |   |       |   | 246,024 |   |  |   | 338,967 |   |  |   | 346,711 |  
|                         |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |        
|                         | Gross margin                                                 |                                        |   | 45,125  |   |       |   | 51,290  |   |  |   | 53,226  |   |  |   | 64,398  |  
|                         | Operating expenses                                           |                                        |   | 24,904  |   |       |   | 31,701  |   |  |   | 38,179  |   |  |   | 39,492  |  
|                         | Depreciation and amortization                                |                                        |   | 8,218   |   |       |   | 8,913   |   |  |   | 9,394   |   |  |   | 9,539   |  
|                         | Selling, general and administrative expenses                 |                                        |   | 5,196   |   |       |   | 5,889   |   |  |   | 6,765   |   |  |   | 6,700   |  
|                         | (Gain) loss on the disposal/write-down of assets             |                                        |   | 4       |   |       |   | 640     |   |  |   | (157    | ) |  |   | (371    | )
|                         |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |        
|                         | Operating earnings (loss)                                    |                                        | $ | 6,803   |   |       | $ | 4,147   |   |  | $ | (955    | ) |  | $ | 9,038   |  
|                         |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |        
|                         | Net earnings (loss)                                          |                                        | $ | 391     |   |       | $ | (3,852  | ) |  | $ | (7,214  | ) |  | $ | (1,338  | )
|                         | Net earnings (loss) per common share 
    basic             |                                        | $ | 0.04    |   |       | $ | (0.45   | ) |  | $ | (0.84   | ) |  | $ | (0.15   | )
|                         | Net earnings (loss) per common share 
    assuming dilution |                                        | $ | 0.04    |   |       | $ | (0.45   | ) |  | $ | (0.84   | ) |  | $ | (0.15   | )
|Discontinued Operations: |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |        
|                         | Net revenues                                                 |                                        | $ | 7,310   |   |       | $ | 8,074   |   |  | $ | 7,267   |   |  | $ | 3,359   |  
|                         |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |        
|                         | Earnings (loss) from operations                              |                                        | $ | (447    | ) |       | $ | (301    | ) |  | $ | (401    | ) |  | $ | (285    | )
|                         | Gain (loss) on disposal                                      |                                        |   |        |   |       |   | (132    | ) |  |   | 4,922   |   |  |   | 1,674   |  
|                         | Net loss on asset sales/write-downs                          |                                        |   |        |   |       |   | (288    | ) |  |   | (117    | ) |  |   | (49     | )
|                         |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |        
|                         | Operating earnings (loss)                                    |                                        | $ | (447    | ) |       | $ | (721    | ) |  | $ | 4,404   |   |  | $ | 1,340   |  
|                         |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |        
|                         | Net earnings (loss)                                          |                                        | $ | (268    | ) |       | $ | (432    | ) |  | $ | 2,642   |   |  | $ | 804     |  
|                         | Net earnings (loss) per common
    share 
    basic         |                                        | $ | (0.03   | ) |       | $ | (0.05   | ) |  | $ | 0.31    |   |  | $ | 0.09    |  
|                         | Net earnings (loss) per common
    share  assuming dilution |                                        | $ | (0.03   | ) |       | $ | (0.05   | ) |  | $ | 0.31    |   |  | $ | 0.09    |  

87



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##### 



|                         |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |         |  
|------------------------ | ------------------------------------------------------------ | -------------------------------------- | - | ------- | - | ----- | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                         |                                                              |                                       
|                         |                                                              | Year Ended December 31, 2001  Quarter
|                         |                                                              |                                       
|                         |                                                              | First                                  |   | Second  |   | Third |   | Fourth 
|                         |                                                              |                                        |   |         |   |       |   |        
|                         |                                                              |                                       
|                         |                                                              | (In thousands, except per share data) 
|Continuing Operations:   |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |        
|                         | Net revenues                                                 |                                        | $ | 247,948 |   |       | $ | 276,708 |   |  | $ | 236,557 |   |  | $ | 190,131 |  
|                         | Cost of products sold                                        |                                        |   | 199,101 |   |       |   | 207,503 |   |  |   | 179,108 |   |  |   | 142,987 |  
|                         |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |        
|                         | Gross margin                                                 |                                        |   | 48,847  |   |       |   | 69,205  |   |  |   | 57,449  |   |  |   | 47,144  |  
|                         | Operating expenses                                           |                                        |   | 27,237  |   |       |   | 26,995  |   |  |   | 26,309  |   |  |   | 26,890  |  
|                         | Depreciation and amortization                                |                                        |   | 7,634   |   |       |   | 7,661   |   |  |   | 8,091   |   |  |   | 8,471   |  
|                         | Selling, general and administrative expenses                 |                                        |   | 6,583   |   |       |   | 8,755   |   |  |   | 7,659   |   |  |   | 4,867   |  
|                         | Loss on the disposal/write-down of assets                    |                                        |   | (11     | ) |       |   | 298     |   |  |   | 1,326   |   |  |   | 4,519   |  
|                         | Allowance for related party note and interest
    receivable |                                        |   |        |   |       |   |        |   |  |   |        |   |  |   | 5,409   |  
|                         |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |        
|                         | Operating earnings (loss)                                    |                                        | $ | 7,404   |   |       | $ | 25,496  |   |  | $ | 14,064  |   |  | $ | (3,012  | )
|                         |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |        
|                         | Net earnings (loss)                                          |                                        | $ | 1,056   |   |       | $ | 11,971  |   |  | $ | 5,142   |   |  | $ | (5,402  | )
|                         | Net earnings (loss) per common
    share 
    basic         |                                        | $ | 0.12    |   |       | $ | 1.33    |   |  | $ | 0.57    |   |  | $ | (0.63   | )
|                         | Net earnings (loss) per common
    share  assuming dilution |                                        | $ | 0.12    |   |       | $ | 1.33    |   |  | $ | 0.57    |   |  | $ | (0.63   | )
|Discontinued Operations: |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |        
|                         | Net revenues                                                 |                                        | $ | 10,563  |   |       | $ | 11,850  |   |  | $ | 9,872   |   |  | $ | 8,050   |  
|                         |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |        
|                         | Earnings (loss) from operations                              |                                        | $ | (178    | ) |       | $ | (30     | ) |  | $ | (11     | ) |  | $ | (344    | )
|                         | Gain on disposal                                             |                                        |   |        |   |       |   |        |   |  |   |        |   |  |   |        |  
|                         | Net loss on asset sales/write-downs                          |                                        |   |        |   |       |   |        |   |  |   |        |   |  |   | (80     | )
|                         |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |        
|                         | Operating earnings (loss)                                    |                                        | $ | (178    | ) |       | $ | (30     | ) |  | $ | (11     | ) |  | $ | (424    | )
|                         |                                                              |                                        |   |         |   |       |   |         |   |  |   |         |   |  |   |        
|                         | Net earnings (loss)                                          |                                        | $ | (106    | ) |       | $ | (18     | ) |  | $ | (7      | ) |  | $ | (255    | )
|                         | Net earnings (loss) per common
    share 
    basic         |                                        | $ | (0.01   | ) |       | $ |        |   |  | $ |        |   |  | $ | (0.03   | )
|                         | Net earnings (loss) per common
    share  assuming dilution |                                        | $ | (0.01   | ) |       | $ |        |   |  | $ |        |   |  | $ | (0.03   | )

In the fourth quarter of 2002, the Company
recorded a gain on the disposal of certain retail assets and
excess land, and recorded the write-down of various service
station/convenience stores due to impairment.

In the fourth quarter of 2001, the Company
recorded a loss on the disposal/write-down of certain refining
and retail assets due to obsolescence and replacement, recorded
the write-down of various service station/convenience stores due
to impairment, and recorded an allowance for a related party
note and interest receivable.



| |     |                                                                                                                                                                                        
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Subsequent to the previously filed
    Form 10-Qs, certain reclassifications have been made
    to present continuing and discontinued operations in accordance
    with SFAS No. 144.

Item 9.     Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure

Not applicable.

88



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##### 



PART III

Certain information required by Part III is
omitted from this Report by virtue of the fact that the
Registrant will file with the Securities and Exchange Commission
a definitive proxy statement relating to the Companys
Annual Meeting of Stockholders to be held May 8, 2003
pursuant to Regulation 14A (the Proxy
Statement) not later than 120 days after the end of
the fiscal year covered by this Report, and certain information
to be included therein is incorporated herein by reference. The
Company expects to disseminate the Proxy Statement to
stockholders on or about April 1, 2003.

Item 10.     Directors
and Executive Officers of the Registrant

The information concerning the Companys
directors required by this Item is incorporated by reference to
the information contained in the Proxy Statement under the
caption Election of Directors.

The information concerning the Companys
executive officers required by this Item is incorporated by
reference to the section in Part I hereof entitled
Executive Officers of the Registrant, following
Item 4.

The information concerning compliance with
Section 16(a) of the Exchange Act required by this Item is
incorporated by reference to the information contained in the
Proxy Statement under the caption Section 16(a)
Beneficial Ownership Reporting Compliance.

Item 11.     Executive
Compensation

The information required by this Item is
incorporated by reference to the information contained in the
Proxy Statement under the captions Election of
Directors, Executive Compensation,
Compensation Committee Report on Executive
Compensation and Compensation Committee Interlocks
and Insider Participation.

Item 12.     Security
Ownership of Certain Beneficial Owners and
Management

The information required by this Item is
incorporated by reference to the information contained in the
Proxy Statement under the captions Election of
Directors, Security Ownership of Management
and Shares Owned by Certain Shareholders.

Item 13.     Certain
Relationships and Related Transactions

The information required by this Item is
incorporated by reference to the information contained in the
Proxy Statement under the captions Compensation Committee
Interlocks and Insider Participation, Certain
Transactions and Indebtedness of Management.

Item 14.     Controls
and Procedures

As of a date within 90 days of the filing
date of this report (the Evaluation Date), under the
supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial
Officer, the Company carried out an evaluation of the
effectiveness of the design and operation of its disclosure
controls and procedures as defined in Rules 13a-14(c) and
15d-14(c) under the Securities Exchange Act of 1934, as amended
(the Exchange Act). Based upon this evaluation, the
Companys CEO and CFO concluded that, as of the Evaluation
Date, the Companys disclosure controls and procedures were
adequate to ensure that information required to be disclosed by
the Company in the reports filed or submitted by the Company
under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SECs
rules and forms.

In addition, there have been no significant
changes in the Companys internal controls or in other
factors that could significantly affect these controls
subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and
internal weaknesses.

89



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##### 



PART IV



|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K

|       |  |                                                                                                       
|------ |  | ------------------------------------------------------------------------------------------------------
|(a)(1) |  | The following financial statements are included
    in Item 8:                                        
|      
|(i)    |  | Independent Auditors Report                                                                          
|      
|(ii)   |  | Consolidated Balance Sheets 
    December 31, 2002 and 2001                                          
|      
|(iii)  |  | Consolidated Statements of Operations 
    Years ended December 31, 2002, 2001 and 2000              
|      
|(iv)   |  | Consolidated Statements of Stockholders
    Equity  Years ended December 31, 2002, 2001 and
    2000
|      
|(v)    |  | Consolidated Statements of Cash Flows 
    Years ended December 31, 2002, 2001 and 2000              
|      
|(vi)   |  | Notes to Consolidated Financial Statements                                                            

(2) Financial Statement Schedule. The
following financial statement schedule of Giant Industries, Inc.
for the years ended December 31, 2002, 2001 and 2000 is
filed as part of this Report and should be read in conjunction
with the Consolidated Financial Statements of Giant Industries,
Inc.

|                                                    |  |   
|--------------------------------------------------- |  | --
|Independent Auditors Report on Schedule            |  | 95
|Schedule II  Valuation and
    Qualifying Accounts |  | 96

Schedules not listed above have been omitted
because they are not applicable or are not required or because
the information required to be set forth therein is included in
the Consolidated Financial Statements or Notes thereto.

(3) Exhibits. The Exhibits listed on
the accompanying Index to Exhibits immediately following the
financial statement schedule are filed as part of, or
incorporated by reference into, this Report.

Contracts with management and any compensatory
plans or arrangements relating to management are as follows:

|        |       |             |  |                                                                                                                                                                                                                                                                                           
|------- | ----- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|No.     |       | Description
|        |       |            
|        | 10.7  |             |  | Giant Industries, Inc. 1998 Stock Incentive Plan.
    Incorporated by reference to Appendix H to the Joint Proxy
    Statement/ Prospectus included in the Companys
    Registration Statement on Form S-4 under the Securities Act
    of 1933 as filed May 4, 1998, File No. 333-51785.
|        | 10.8  |             |  | Amendment No. 1 to 1998 Stock Incentive
    Plan, dated September 13, 2000.                                                                                                                                                                                                               
|        | 10.9  |             |  | Amendment No. 2 to 1998 Stock Incentive
    Plan, dated March 27, 2002.                                                                                                                                                                                                                   
|        | 10.10 |             |  | 1989 Stock Incentive Plan of the Company.
    Incorporated by reference to Exhibit 10.1 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 1989, File No. 1-10398.                                                                                
|        | 10.11 |             |  | Amendment No. 1 dated August 14, 1996,
    to 1989 Stock Incentive Plan. Incorporated by reference to
    Exhibit 10 to the Companys Report on Form 10-Q
    for the quarter ended September 30, 1996, File
    No. 1-10398.                                                             
|        | 10.12 |             |  | ESOP Substitute Excess Deferred Compensation
    Benefit Plan. Incorporated by reference to Exhibit 10.8 to
    the Companys Annual Report on Form 10-K for the
    fiscal year ended December 31, 1992, File No. 1-10398.                                                               
|        | 10.38 |             |  | Employment Agreement dated as of
    December 11, 1997, between James E. Acridge and the
    Company. Incorporated by reference to Exhibit 10.23 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 1997, File No. 1-10398.                       

90



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##### 



|        |       |             |  |                                                                                                                                                                                                                                                                       
|------- | ----- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|No.     |       | Description
|        |       |            
|        | 10.39 |             |  | Employment Agreement dated as of
    December 11, 1997, between Fredric L. Holliger and the
    Company. Incorporated by reference to Exhibit 10.24 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 1997, File No. 1-10398.
|        | 10.40 |             |  | Employment Agreement dated as of
    December 11, 1997, between Morgan Gust and the Company.
    Incorporated by reference to Exhibit 10.25 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 1997, File No. 1-10398.        

(b) Reports on Form 8-K. No reports on
Form 8-K were filed by the Company during the fourth
quarter of the fiscal year ended December 31, 2002. On
March 11, 2003, the Company filed a Form 8-K dated
March 11, 2003, containing a press release detailing the
Companys earnings for the fourth quarter of 2002 and the
year ended December 31, 2002.

91



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##### 



SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.



| |                       
| | ----------------------
| | GIANT INDUSTRIES, INC.



| |     |                     
| | --- | --------------------
| | By: | /s/ FRED L. HOLLIGER

| |                            
| | ---------------------------
| |                            
| | Fred L. Holliger           
| | Chairman of the Board      
| | and Chief Executive Officer

March 28, 2003

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the date indicated.

|                                               |  |                                                                                  |  |                |  | 
|---------------------------------------------- |  | -------------------------------------------------------------------------------- |  | -------------- |  | 
|/s/ FRED L. HOLLIGERFred L. Holliger           |  | Chairman of the Board, Chief Executive
    Officer and Director                  |  | March 28, 2003
|                                              
|/s/ MARK B. COXMark B. Cox                     |  | Vice President, Treasurer, Chief Financial
    Officer and Assistant Secretary   |  | March 28, 2003
|                                              
|/s/ GARY R. DALKEGary R. Dalke                 |  | Vice President, Controller, Chief Accounting
    Officer and Assistant Secretary |  | March 28, 2003
|                                              
|/s/ ANTHONY J. BERNITSKYAnthony J. Bernitsky   |  | Director                                                                         |  | March 28, 2003
|                                              
|/s/ LARRY L. DEROINLarry L. DeRoin             |  | Director                                                                         |  | March 28, 2003
|                                              
|/s/ RICHARD T. KALEN, JR.Richard T. Kalen, Jr. |  | Director                                                                         |  | March 28, 2003
|                                              
|/s/ BROOKS J. KLIMLEYBrooks J. Klimley         |  | Director                                                                         |  | March 28, 2003
|                                              
|/s/ GEORGE M. RAPPORTGeorge M. Rapport         |  | Director                                                                         |  | March 28, 2003
|                                              
|/s/ JAMES E. ACRIDGEJames E. Acridge           |  | Director                                                                         |  | March 28, 2003

92



---



##### 



CERTIFICATION OF PRINCIPAL EXECUTIVE
OFFICER

I, Fred Holliger, certify that:



| |                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.     I have reviewed
    this annual report on Form 10-K of Giant Industries, Inc.;                                                                                                                                                                                                                                                                  
|
| | 2.     Based on my
    knowledge, this annual report does not contain any untrue
    statement of a material fact or omit to state a material fact
    necessary to make the statements made, in light of the
    circumstances under which such statements were made, not
    misleading with respect to the period covered by this annual
    report;
|
| | 3.     Based on my
    knowledge, the financial statements, and other financial
    information included in this annual report, fairly present in
    all material respects the financial condition, results of
    operations and cash flows of the registrant as of, and for, the
    period presented in this annual report;                        
|
| | 4.     The
    registrants other certifying officers and I are
    responsible for establishing and maintaining disclosure controls
    and procedures (as defined in Exchange Act Rules 13a-14 and
    15d-14) for the registrant and we have:                                                                                                       



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) Designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) Evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) Presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5.     The
    registrants other certifying officers and I have
    disclosed, based on our most recent evaluation, to the
    registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) All significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) Any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6.     The
    registrants other certifying officers and I have indicated
    in this annual report whether or not there were significant
    changes in internal controls or in other factors that could
    significantly affect internal controls subsequent to the date of
    our most recent evaluation, including any corrective actions
    with regard to significant deficiencies and material weaknesses.



| |                                
| | -------------------------------
| | By: /s/ FRED HOLLIGER          
| |                                
| | Name: Fred Holliger            
| | Title:  Chief Executive Officer

Date: March 28, 2003.

93



---



##### 



CERTIFICATION OF PRINCIPAL FINANCIAL
OFFICER

I, Mark B. Cox, certify that:



| |                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.     I have reviewed
    this annual report on Form 10-K of Giant Industries, Inc.;                                                                                                                                                                                                                                                                  
|
| | 2.     Based on my
    knowledge, this annual report does not contain any untrue
    statement of a material fact or omit to state a material fact
    necessary to make the statements made, in light of the
    circumstances under which such statements were made, not
    misleading with respect to the period covered by this annual
    report;
|
| | 3.     Based on my
    knowledge, the financial statements, and other financial
    information included in this annual report, fairly present in
    all material respects the financial condition, results of
    operations and cash flows of the registrant as of, and for, the
    period presented in this annual report;                        
|
| | 4.     The
    registrants other certifying officers and I are
    responsible for establishing and maintaining disclosure controls
    and procedures (as defined in Exchange Act Rules 13a-14 and
    15d-14) for the registrant and we have:                                                                                                       



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) Designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) Evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) Presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5.     The
    registrants other certifying officers and I have
    disclosed, based on our most recent evaluation, to the
    registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) All significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) Any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6.     The
    registrants other certifying officers and I have indicated
    in this annual report whether or not there were significant
    changes in internal controls or in other factors that could
    significantly affect internal controls subsequent to the date of
    our most recent evaluation, including any corrective actions
    with regard to significant deficiencies and material weaknesses.



| |                                
| | -------------------------------
| | By: /s/ MARK B. COX            
| |                                
| | Name: Mark B. Cox              
| | Title:  Chief Financial Officer

Date: March 28, 2003.

94



---



##### 



INDEPENDENT AUDITORS REPORT

To the Board of Directors and Stockholders of

Giant Industries, Inc.


Scottsdale, Arizona


We have audited the consolidated financial
statements of Giant Industries, Inc. and subsidiaries (the
Company) as of December 31, 2002 and 2001, and for
each of the three years in the period ended December 31,
2002, and have issued our report thereon dated March 5,
2003 which expresses an unqualified opinion and includes
explanatory paragraphs relating to changes in accounting methods
for the adoption of Statement of Financial Accounting Standards
Nos. 142 and 144; such financial statements and report are
included elsewhere in this Form 10-K. Our audits also
included the consolidated financial statement schedule of the
Company, listed in Item 15. This consolidated financial
statement schedule is the responsibility of the Companys
management. Our responsibility is to express an opinion based on
our audits. In our opinion, such consolidated financial
statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.



| |                          
| | -------------------------
| | /s/ DELOITTE & TOUCHE LLP

Phoenix, Arizona

March 5, 2003


95



---



##### 



SCHEDULE II

GIANT INDUSTRIES, INC. AND
SUBSIDIARIES

Valuation and Qualifying Accounts


Three Years Ended December 31,
2002


Trade Receivables:

|                                |  |                |     |              |  |              |     |            |  |   |      |   |  |   |     | 
|------------------------------- |  | -------------- | --- | ------------ |  | ------------ | --- | ---------- |  | - | ---- | - |  | - | --- | 
|                                |  | Balance at     |     | Charged      |  |              |     | Balance at
|                                |  | Beginning      |     | to Costs     |  |              |     | End of    
|                                |  | of Period      |     | and Expenses |  | Deduction(a) |     | Period    
|                                |  |                |     |              |  |              |     |           
|                                |  |               
|                                |  | (In thousands)
|Year ended December 31, 2002:   |  |                |     |              |  |              |     |            |  |   |      |   |  |   |     | 
|Allowance for doubtful accounts |  | $              | 540 |              |  | $            | 517 |            |  | $ | (407 | ) |  | $ | 650 | 
|                                |  |                |     |              |  |              |     |            |  |   |      |   |  |   |     | 
|Year ended December 31, 2001:   |  |                |     |              |  |              |     |            |  |   |      |   |  |   |     | 
|Allowance for doubtful accounts |  | $              | 356 |              |  | $            | 602 |            |  | $ | (418 | ) |  | $ | 540 | 
|                                |  |                |     |              |  |              |     |            |  |   |      |   |  |   |     | 
|Year ended December 31, 2000:   |  |                |     |              |  |              |     |            |  |   |      |   |  |   |     | 
|Allowance for doubtful accounts |  | $              | 591 |              |  | $            | 244 |            |  | $ | (479 | ) |  | $ | 356 | 
|                                |  |                |     |              |  |              |     |            |  |   |      |   |  |   |     | 



---



|    |                                                                           
|--- | --------------------------------------------------------------------------
|(a) | Deductions are specific trade accounts determined
    to be uncollectible.

Related Party Note and Interest
Receivable:

|                                |  |            |       |              |  |           |       |            |  |   |   |  |  |   |       | 
|------------------------------- |  | ---------- | ----- | ------------ |  | --------- | ----- | ---------- |  | - | - |  |  | - | ----- | 
|                                |  | Balance at |       | Charged      |  |           |       | Balance at
|                                |  | Beginning  |       | to Costs     |  |           |       | End of    
|                                |  | of Period  |       | and Expenses |  | Deduction |       | Period    
|                                |  |            |       |              |  |           |       |           
|Year ended December 31, 2002:   |  |            |       |              |  |           |       |            |  |   |   |  |  |   |       | 
|Allowance for doubtful accounts |  | $          | 5,409 |              |  | $         | 0     |            |  | $ | 0 |  |  | $ | 5,409 | 
|                                |  |            |       |              |  |           |       |            |  |   |   |  |  |   |       | 
|Year ended December 31, 2001:   |  |            |       |              |  |           |       |            |  |   |   |  |  |   |       | 
|Allowance for doubtful accounts |  | $          | 0     |              |  | $         | 5,409 |            |  | $ | 0 |  |  | $ | 5,409 | 
|                                |  |            |       |              |  |           |       |            |  |   |   |  |  |   |       | 

96



---



##### 



GIANT INDUSTRIES, INC.

ANNUAL REPORT ON FORM 10-K

YEAR ENDED DECEMBER 31, 2002




INDEX TO EXHIBITS


Definitions:

Form S-1  Refers to the
Form S-1 Registration Statement under the Securities Act of
1933 as filed October 16, 1989, File No. 33-31584.

Amendment No. 3  Refers to the
Amendment No. 3 to Form S-1 Registration Statement
under the Securities Act of 1933 as filed December 12,
1989, File No. 33-31584.

Form S-3  Refers to the
Form S-3 Registration Statement under the Securities Act of
1933 as filed September 22, 1993, File No. 33-69252.

|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | ---- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|No.     |      | Description
|        |      |            
|        | 2.1  |             |  | Definitive Agreement dated April 18, 1997,
    by and between Giant Four Corners, Inc., as Buyer,
    and Thriftway Marketing Corp. and Clayton Investment Company,
    collectively, as Seller. Incorporated by reference
    to Exhibit 2.1 to the Companys Report on
    Form 8-K for the period May 28, 1997, File
    No. 1-10398.                                                                                                                                                                                                                                                                                                                      
|        | 2.2  |             |  | Stock Purchase Agreement dated April 30,
    1997, by and among Phoenix Fuel Co., Inc., (the
    Company), J.W. Wilhoit, as Trustee of the Wilhoit
    Trust Agreement Dated 12/26/74, Katherine C. Lahowetz, as
    Trustee of the Theresa Ann Wilhoit Grantor Retained Annuity
    Trust Dated 4/4/97, Katherine C. Lahowetz, and Katherine C.
    Lahowetz, as Custodian for the Benefit of Emily Lahowetz, a
    minor (collectively, the Shareholders) and Giant
    Industries Arizona, Inc., (the Purchaser).
    Incorporated by reference to Exhibit 2.1 to the
    Companys Report on Form 8-K for the period
    June 3, 1997, File No. 1-10398.
|        | 2.3  |             |  | Asset Purchase Agreement dated February 8,
    2002, by and among, BP Corporation North America Inc., BP
    Products North America Inc., and Giant Industries, Inc.
    Incorporated by reference to Exhibit 2.3 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 2001, File No. 1-10398.                                                                                                                                                                                                                                                                                                                              
|        | 3.1  |             |  | Restated Certificate of Incorporation of Giant
    Industries, Inc., a Delaware corporation. Incorporated by
    reference to Exhibit 3.1 to Amendment No. 3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 3.2  |             |  | Bylaws of Giant Industries, Inc., a Delaware
    corporation, as amended September 9, 1999. Incorporated by
    reference to Exhibit 3.2 to the Companys Annual
    Report on Form 10-K for the fiscal year ended
    December 31, 1999, File No. 1-10398.                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 3.3  |             |  | Articles of Incorporation of Giant Industries
    Arizona, Inc., an Arizona corporation (Giant
    Arizona) formerly Giant Acquisition Corp. Incorporated by
    reference to Exhibit 2.1, Annex V to Form S-1.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 3.4  |             |  | Bylaws of Giant Arizona. Incorporated by
    reference to Exhibit 2.1, Annex VI to Form S-1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 3.5  |             |  | Articles of Incorporation of Ciniza Production
    Company. Incorporated by reference to Exhibit 3.7 to
    Form S-3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 3.6  |             |  | Bylaws of Ciniza Production Company. Incorporated
    by reference to Exhibit 3.8 to Form S-3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 3.7  |             |  | Articles of Incorporation of Giant Stop-N-Go of
    New Mexico, Inc. Incorporated by reference to Exhibit 3.9
    to Form S-3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 3.8  |             |  | Bylaws of Giant Stop-N-Go of New Mexico, Inc.
    Incorporated by reference to Exhibit 3.10 to Form S-3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 3.9  |             |  | Articles of Incorporation of Giant Four Corners,
    Inc. Incorporated by reference to Exhibit 3.11 to
    Form S-3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 3.10 |             |  | Bylaws of Giant Four Corners, Inc. Incorporated
    by reference to Exhibit 3.12 to Form S-3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 3.11 |             |  | Articles of Incorporation of Giant Mid-Continent,
    Inc. Incorporated by reference to Exhibit 3.13 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 1994, File No. 1-10398.                                                                                                                                                                                                                                                                                                                                                                                                                                           



---



##### 



|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | ---- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|No.     |      | Description
|        |      |            
|        | 3.12 |             |  | Bylaws of Giant Mid-Continent, Inc. Incorporated
    by reference to Exhibit 3.14 to the Companys Annual
    Report on Form 10-K for the fiscal year ended
    December 31, 1994, File No. 1-10398.                                                                                                                                                                                                                                  
|        | 3.13 |             |  | Articles of Incorporation of San Juan Refining
    Company. Incorporated by reference to Exhibit 3.15 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 1995, File No. 1-10398.                                                                                                                                                                                                              
|        | 3.14 |             |  | Bylaws of San Juan Refining Company. Incorporated
    by reference to Exhibit 3.16 to the Companys Annual
    Report on Form 10-K for the fiscal year ended
    December 31, 1995, File No. 1-10398.                                                                                                                                                                                                                                 
|        | 3.15 |             |  | Amended and Restated Articles of Incorporation of
    Phoenix Fuel Co., Inc. Incorporated by reference to
    Exhibit 3.15 to the Companys Registration Statement
    on Form S-4 under the Securities Act of 1933 as filed
    July 15, 2002, File No. 333-92386.                                                                                                                                                                   
|        | 3.16 |             |  | Amended Bylaws of Phoenix Fuel Co., Inc.
    Incorporated by reference to Exhibit 3.18 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 1997, File No. 1-10398.                                                                                                                                                                                                                             
|        | 3.17 |             |  | Articles of Incorporation of DeGuelle Oil
    Company. Incorporated by reference to Exhibit 3.19 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 1998, File No. 1-10398.                                                                                                                                                                                                                   
|        | 3.18 |             |  | Amended Bylaws of DeGuelle Oil Company.
    Incorporated by reference to Exhibit 3.18 to the
    Companys Registration Statement on Form S-4 under the
    Securities Act of 1933 as filed July 15, 2002, File
    No. 333-92386.                                                                                                                                                                                                    
|        | 3.19 |             |  | Articles of Incorporation of Giant Pipeline
    Company. Incorporated by reference to Exhibit 3.21 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 1999, File No. 1-10398.                                                                                                                                                                                                                 
|        | 3.20 |             |  | Bylaws of Giant Pipeline Company. Incorporated by
    reference to Exhibit 3.22 to the Companys Annual
    Report on Form 10-K for the fiscal year ended
    December 31, 1999, File No. 1-10398.                                                                                                                                                                                                                                    
|        | 3.21 |             |  | Certificate of Incorporation of Giant Yorktown,
    Inc. Incorporated by reference to Exhibit 3.21 to the
    Companys Annual Report on Form 10-K for the year
    ended December 31, 2001, File No. 1-10398.                                                                                                                                                                                                                        
|        | 3.22 |             |  | Bylaws of Giant Yorktown, Inc. Incorporated by
    reference to Exhibit 3.22 to the Companys Annual
    Report on Form 10-K for the year ended December 31,
    2001, File No. 1-10398.                                                                                                                                                                                                                                              
|        | 3.23 |             |  | Certificate of Incorporation of Giant Yorktown
    Holding Company. Incorporated by reference to Exhibit 3.23
    to the Companys Registration Statement on Form S-4
    under the Securities Act of 1933 as filed July 15, 2002,
    File No. 333-92386.                                                                                                                                                                            
|        | 3.24 |             |  | Bylaws of Giant Yorktown Holding Company.
    Incorporated by reference to Exhibit 3.24 to the
    Companys Registration Statement on Form S-4 under the
    Securities Act of 1933 as filed July 15, 2002, File
    No. 333-92386.                                                                                                                                                                                                  
|        | 4.1  |             |  | Indenture dated as of August 26, 1997, among
    the Company, as Issuer, the Subsidiary Guarantors, as
    guarantors, and The Bank of New York, as Trustee, relating to
    $150,000,000 of 9% Senior Subordinated Notes due 2007.
    Incorporated by reference to Exhibit 4.8 to the
    Companys Registration Statement on Form S-4 under the
    Securities Act of 1933 as filed October 9, 1997, File
    No. 333-37561.       
|        | 4.2  |             |  | Indenture, dated as of May 14, 2002, among
    the Company, as Issuer, the Subsidiary Guarantors, as
    guarantors, and The Bank of New York, as Trustee, relating to
    $200,000,000 of 11% Senior Subordinated Notes 2012. Incorporated
    by reference to Exhibit 4.2 to the Companys
    Registration Statement on Form S-4 under the Securities Act
    of 1933 as filed July 15, 2002, File No. 333-92386.                  
|        | 10.1 |             |  | Second Amended and Restated Credit Agreement,
    dated May 14, 2002, among Giant Industries, Inc., Bank of
    America, N.A., as Administrative Agent and as Letter of Credit
    Bank and the Lenders parties thereto. Incorporated by reference
    to Exhibit 10.1 to the Companys Registration
    Statement on Form S-4 under the Securities Act of 1933 as
    filed July 15, 2002, File No. 333-92386.                       
|        | 10.2 |             |  | First Amendment, dated October 28, 2002 to
    Second Amended and Restated Credit Agreement, dated May 14,
    2002, among Giant Industries, Inc., Bank of America, N.A., as
    Administrative Agent and as Letter of Credit Issuing Bank and
    the Lenders parties thereto. Incorporated by reference to
    Exhibit 10.1 to the Companys Report on Form 10-Q
    for the quarter ended September 30, 2002, File
    No. 1-10398.



---



##### 



|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | ----- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|No.     |       | Description
|        |       |            
|        | 10.3  |             |  | Loan Agreement, dated as of May 14, 2002, by
    and among Giant Yorktown, Inc., as Borrower, Wells Fargo Bank
    Nevada, National Association, as Collateral Agent, and the
    Persons listed on Schedule IA thereto, as Lenders.
    Incorporated by reference to Exhibit 10.38 to the
    Companys Registration Statement on Form S-4 under the
    Securities Act of 1933 as filed July 15, 2002, File
    No. 333-92386.                                             
|        | 10.4  |             |  | Amendment to Loan Agreement and Omnibus
    Amendment, dated as of May 22, 2002 among Giant Yorktown,
    Inc., Giant Industries, Inc., Giant Industries Arizona, Inc.,
    Wells Fargo Bank Nevada, National Association, as Collateral
    Agent, and the Lenders listed on the signature pages thereto.
    Incorporated by reference to Exhibit 10.2 to the
    Companys Report on Form 10-Q for the quarter ended
    September 30, 2002, File No. 1-10398.            
|        | 10.5  |             |  | Second Amendment to Loan Agreement and Omnibus
    Amendment, dated as of October 28, 2002, among Giant
    Yorktown, Inc., Giant Industries, Inc., Giant Industries
    Arizona, Inc., Wells Fargo Bank Nevada, National Association, as
    Collateral Agent, and the Lenders listed on the signature pages
    thereto. Incorporated by reference to Exhibit 10.3 to the
    Companys Report on Form 10-Q for the quarter ended
    September 30, 2002, File No. 1-10398.
|        | 10.6* |             |  | Third Amendment to Loan Agreement and Omnibus
    Amendment, dated as of December 20, 2002, among Giant
    Yorktown, Inc., Giant Industries, Inc., Giant Industries
    Arizona, Inc., Wells Fargo Bank Nevada, National Association, as
    Collateral Agent, and the Lenders listed on the signature pages
    thereto.                                                                                                                                                   
|        | 10.7  |             |  | Giant Industries, Inc. 1998 Stock Incentive Plan.
    Incorporated by reference to Appendix H to the Joint Proxy
    Statement/ Prospectus included in the Companys
    Registration Statement on Form S-4 under the Securities Act
    of 1933 as filed May 4, 1998, File No. 333-51785.                                                                                                                                                                                   
|        | 10.8* |             |  | Amendment No. 1 to 1998 Stock Incentive
    Plan, dated September 13, 2000.                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 10.9* |             |  | Amendment No. 2 to 1998 Stock Incentive
    Plan, dated March 27, 2002.                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 10.10 |             |  | 1989 Stock Incentive Plan of the Company.
    Incorporated by reference to Exhibit 10.1 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 1989, File No. 1-10398.                                                                                                                                                                                                                                                                   
|        | 10.11 |             |  | Amendment No. 1 dated August 14, 1996,
    to 1989 Stock Incentive Plan. Incorporated by reference to
    Exhibit 10 to the Companys Report on Form 10-Q
    for the quarter ended September 30, 1996, File
    No. 1-10398.                                                                                                                                                                                                                                                
|        | 10.12 |             |  | ESOP Substitute Excess Deferred Compensation
    Benefit Plan. Incorporated by reference to Exhibit 10.8 to
    the Companys Annual Report on Form 10-K for the
    fiscal year ended December 31, 1992, File No. 1-10398.                                                                                                                                                                                                                                                  
|        | 10.13 |             |  | Retail Lease dated July 1, 1998, between
    Pinnacle Citadel LLC (Landlord) and Giant Industries
    Arizona, Inc. (Tenant). Incorporated by reference to
    Exhibit 10.29 to the Companys Annual Report on
    Form 10-K for the fiscal year ended December 31, 1998,
    File No. 1-10398.                                                                                                                                                                          
|        | 10.14 |             |  | Sublease dated September 1, 2000, between
    Prime Pinnacle Peak Properties, Inc., (Sublessee)
    and Giant Industries Arizona, Inc., (Sublessor).
    Incorporated by reference to Exhibit 10.10 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 2000, File No. 1-10398.                                                                                                                                                   
|        | 10.15 |             |  | Retail Lease dated July 1, 1998, between
    Pinnacle Citadel LLC (Landlord) and Giant Industries
    Arizona, Inc. (Tenant). Incorporated by reference to
    Exhibit 10.30 to the Companys Annual Report on
    Form 10-K for the fiscal year ended December 31, 1998,
    File No. 1-10398.                                                                                                                                                                          
|        | 10.16 |             |  | Retail Sublease dated July 1, 1998 between
    Giant Industries Arizona, Inc. (Lessor) and Pinnacle
    Inn at the Citadel LLC (Tenant). Incorporated by
    reference to Exhibit 10.31 to the Companys Annual
    Report on Form 10-K for the fiscal year ended
    December 31, 1998, File No. 1-10398.                                                                                                                                                               
|        | 10.17 |             |  | Aircraft Lease Purchase Agreement dated as of
    June 21, 1991, between Metlife Capital Corporation and the
    Company. Incorporated by reference to Exhibit 10.1 to the
    Companys Report on Form 10-Q for the quarter ended
    June 30, 1991, File No. 1-10398.                                                                                                                                                                                                      
|        | 10.18 |             |  | Agreement dated September 17, 1998, between
    James E. Acridge (Borrower) and Giant Industries,
    Inc. (Lender). Incorporated by reference to
    Exhibit 10.34 to the Companys Annual Report on
    Form 10-K for the fiscal year ended December 31, 1998,
    File No. 1-10398.                                                                                                                                                                                   



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##### 



|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- | ----- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|No.     |       | Description
|        |       |            
|        | 10.19 |             |  | Modification Agreement dated December 23,
    1998, to Agreement dated September 17, 1998, between James
    E. Acridge (Borrower) and Giant Industries, Inc.
    (Lender). Incorporated by reference to
    Exhibit 10.36 to the Companys Annual Report on
    Form 10-K for the fiscal year ended December 31, 1998,
    File No. 1-10398.                                                                        
|        | 10.20 |             |  | Amended and Restated Loan Agreement dated
    March 20, 2000, between James E. Acridge
    (Borrower) and Giant Industries, Inc.
    (Lender). Incorporated by reference to
    Exhibit 10.26 to the Companys Annual Report on
    Form 10-K for the fiscal year ended December 31, 1999,
    File No. 1-10398.                                                                                                     
|        | 10.21 |             |  | Loan Modification Agreement dated
    February 28, 2001, by and among James E. Acridge
    (Borrower), Giant Industries, Inc., and Pinnacle
    Rodeo, L.L.C. Incorporated by reference to Exhibit 10.18 to
    the Companys Annual Report on Form 10-K for the
    fiscal year ended December 31, 2000, File No. 1-10398.                                                                                            
|        | 10.22 |             |  | First Amendment to Amended and Restated
    Promissory Note and Loan Modification Agreement dated
    March 28, 2001, by James E. Acridge and Giant Industries,
    Inc. Incorporated by reference to Exhibit 10.19 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 2000, File No. 1-10398.                                                                                   
|        | 10.23 |             |  | Promissory Note for $4,000,000 dated
    September 17, 1998, from James E. Acridge to Giant
    Industries, Inc. Incorporated by reference to Exhibit 10.35
    to the Companys Annual Report on Form 10-K for the
    fiscal year ended December 31, 1998, File No. 1-10398.                                                                                                                                           
|        | 10.24 |             |  | Amended and Restated Promissory Note for
    $5,000,000 dated December 23, 1998, from James E. Acridge
    to Giant Industries, Inc. Incorporated by reference to
    Exhibit 10.37 to the Companys Annual Report on
    Form 10-K for the fiscal year ended December 31, 1998,
    File No. 1-10398.                                                                                                                   
|        | 10.25 |             |  | Amended and Restated Promissory Note for
    $5,000,000 dated March 10, 2000, from James E. Acridge to
    Giant Industries, Inc. Incorporated by reference to
    Exhibit 10.27 to the Companys Annual Report on
    Form 10-K for the fiscal year ended December 31, 1999,
    File No. 1-10398.                                                                                                                      
|        | 10.26 |             |  | Modification Agreement dated February 28,
    2001, between James E. Acridge (Borrower) and Giant
    Industries, Inc. Incorporated by reference to Exhibit 10.1
    to the Companys Quarterly Report on Form 10-Q for the
    quarter ended March 31, 2001, File No. 1-10398.                                                                                                                                        
|        | 10.27 |             |  | Amended and Restated Promissory Note dated
    February 28, 2001. Incorporated by reference to
    Exhibit 10.2 to the Companys Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2001, File
    No. 1-10398.                                                                                                                                                                                           
|        | 10.28 |             |  | Fourth Amended and Restated Promissory Note dated
    March 28, 2001, from James E. Acridge to Giant Industries,
    Inc. Incorporated by reference to Exhibit 10.21 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 2001, File No. 1-10398.                                                                                                                                  
|        | 10.29 |             |  | Pledge and Security Agreement dated
    March 10, 2000 from James E. Acridge and Pinnacle Rodeo,
    L.L.C., to Giant Industries, Inc. Incorporated by reference to
    Exhibit 10.28 to the Companys Annual Report on
    Form 10-K for the fiscal year ended December 31, 1999,
    File No. 1-10398.                                                                                                                 
|        | 10.30 |             |  | First Amendment dated March 9, 2001, to
    Pledge and Security Agreement dated March 10, 2000, from
    James E. Acridge and Pinnacle Rodeo, L.L.C., to Giant
    Industries, Inc. Incorporated by reference to Exhibit 10.24
    to the Companys Annual Report on Form 10-K for the
    fiscal year ended December 31, 2000, File No. 1-10398.                                                                        
|        | 10.31 |             |  | Pledge and Security Agreement dated
    March 28, 2001, by James E. Acridge in favor of Giant
    Industries, Inc. Incorporated by reference to Exhibit 10.25
    to the Companys Annual Report on Form 10-K for the
    fiscal year ended December 31, 2000, File No. 1-10398.                                                                                                                                         
|        | 10.32 |             |  | Purchase Agreement dated January 26, 2001
    between James E. Acridge, Trustee, for and on behalf of the
    Acridge Family Trust (Seller), and Giant Industries,
    Inc. (Buyer). Incorporated by reference to
    Exhibit 10.26 to the Companys Annual Report on
    Form 10-K for the fiscal year ended December 31, 2000,
    File No. 1-10398.                                                               
|        | 10.33 |             |  | Deed of Trust dated January 26, 2001 by and
    among James E. Acridge, Trustee, for and on behalf of the
    Acridge Family Trust (Trustor), Giant Industries,
    Inc. (Beneficiary), and First American Title
    Insurance Company (Trustee). Incorporated by
    reference to Exhibit 10.27 to the Companys Annual
    Report on Form 10-K for the fiscal year ended
    December 31, 2000, File No. 1-10398.



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##### 



|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                 
|------- | ----- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|No.     |       | Description
|        |       |            
|        | 10.34 |             |  | First Amendment dated February 12, 2001 to
    Purchase Agreement dated January 26, 2001, between James E.
    Acridge, Trustee, for and on behalf of the Acridge Family Trust,
    and Giant Industries, Inc. Incorporated by reference to
    Exhibit 10.28 to the Companys Annual Report on
    Form 10-K for the fiscal year ended December 31, 2000,
    File No. 1-10398.
|        | 10.35 |             |  | Second Amendment dated March 1, 2001, to
    Purchase Agreement dated January 26, 2001, between James E.
    Acridge, Trustee, for and on behalf of the Acridge Family Trust,
    and Giant Industries, Inc. Incorporated by reference to
    Exhibit 10.29 to the Companys Annual Report on
    Form 10-K for the fiscal year ended December 31, 2000,
    File No. 1-10398.  
|        | 10.36 |             |  | Third Amendment dated March 9, 2001, to
    Purchase Agreement dated January 26, 2001, between James E.
    Acridge, Trustee, for and on behalf of the Acridge Family Trust,
    and Giant Industries, Inc. Incorporated by reference to
    Exhibit 10.30 to the Companys Annual Report on
    Form 10-K for the fiscal year ended December 31, 2000,
    File No. 1-10398.   
|        | 10.37 |             |  | Rights Purchase Agreement dated
    September 20, 2001, by and between Giant Industries
    Arizona, Inc. and James E. Acridge, Trustee for and on behalf of
    the Acridge Family Trust. Incorporated by reference to
    Exhibit 10.1 to the Companys Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2001,
    File No. 1-10398.                     
|        | 10.38 |             |  | Employment Agreement dated as of
    December 11, 1997, between James E. Acridge and the
    Company. Incorporated by reference to Exhibit 10.23 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 1997, File No. 1-10398.                                                                                                             
|        | 10.39 |             |  | Employment Agreement dated as of
    December 11, 1997, between Fredric L. Holliger and the
    Company. Incorporated by reference to Exhibit 10.24 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 1997, File No. 1-10398.                                                                                                          
|        | 10.40 |             |  | Employment Agreement dated as of
    December 11, 1997, between Morgan Gust and the Company.
    Incorporated by reference to Exhibit 10.25 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 1997, File No. 1-10398.                                                                                                                  
|        | 10.41 |             |  | Consulting Agreement dated January 1, 1990,
    between the Company and Kalen and Associates. Incorporated by
    reference to Exhibit 10.66 to the Companys Annual
    Report on Form 10-K for the fiscal year ended
    December 31, 1990, File No. 1-10398.                                                                                                                 
|        | 18.1  |             |  | Letter regarding change in accounting principles.
    Incorporated by reference to Exhibit 18.1 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended December 31, 1990, File No. 1-10398.                                                                                                                                                              
|        | 21.1* |             |  | Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                                                    
|        | 23.1* |             |  | Consent of Deloitte & Touche LLP to
    incorporate report in previously filed Registration Statements.                                                                                                                                                                                                                                                                         
|        | 99.1* |             |  | Chief Executive Officers Certification
    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                          
|        | 99.2* |             |  | Chief Financial Officers Certification
    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                          



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|  |                
|- | ---------------
|* | Filed herewith.